<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1996
REGISTRATION NO. 333-11919
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIDWAY GAMES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3999 22-2906244
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3401 NORTH CALIFORNIA AVENUE
CHICAGO, ILLINOIS 60618
(773) 961-2222
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
NEIL D. NICASTRO
CHAIRMAN OF THE BOARD
MIDWAY GAMES INC.
3401 NORTH CALIFORNIA AVENUE
CHICAGO, ILLINOIS 60618
(773) 961-2222
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
PAUL S. GOODMAN, ESQ. HOWARD L. SHECTER, ESQ.
SHACK & SIEGEL, P.C. MORGAN, LEWIS & BOCKIUS LLP
530 FIFTH AVENUE 101 PARK AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10178
(212) 782-0700 (212) 309-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the offering, all of which shall
be borne by the Registrant, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission fee................................ $ 44,493.10
NASD filing fee....................................................... 13,403.00
New York Stock Exchange filing fee.................................... $ 211,000.00
Blue Sky fees and expenses............................................ 20,000.00
Transfer Agent fees................................................... 1,000.00
Printing and engraving expenses....................................... 250,000.00
Legal fees and expenses............................................... 300,000.00
Accountants' fees and expenses........................................ 325,000.00
Miscellaneous......................................................... 35,103.90
--------
Total....................................................... $1,200,000.00
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's authority to indemnify its officers and directors is
governed by the provisions of Section 145 of the General Corporation Law of the
State of Delaware (the "DGCL") and by the Certificate of Incorporation of the
Registrant. The Certificate of Incorporation of the Registrant provides that the
Registrant shall, to the fullest extent permitted by Section 145 of the DGCL,
(i) indemnify any and all persons whom it shall have power to indemnify under
said section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, and (ii) advance expenses to
any and all said persons, and that such indemnification and advances shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in their official capacities and as to
action in another capacity while holding such offices, and shall continue as to
persons who have ceased to be directors, officers, employees or agents and shall
inure to the benefit of the heirs, executors and administrators of such person.
In addition, the Certificate of Incorporation of the Registrant provides for the
elimination of personal liability of directors of the Registrant to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, to the fullest extent permitted by the DGCL, as amended and
supplemented.
The Registrant has entered into indemnity agreements with each of its
directors and executive officers whereby the Registrant will, in general,
indemnify such directors and executive officers, to the extent permitted by the
Registrant's Certificate of Incorporation and the laws of the State of Delaware,
against any expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement incurred in connection with any actual or threatened action
or proceeding to which such director or officer is made or threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the Registrant.
The Registrant also maintains directors' and officers' liability insurance
providing for $10.0 million in coverage.
Reference is made to the Underwriting Agreement filed as Exhibit 1 hereto
which contains provisions for the indemnification of officers, directors and
controlling persons of the Registrant under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not Applicable
II-1
<PAGE> 3
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------- -----------------------------------------------------------------------------
<C> <S>
#1 Form of Underwriting Agreement.
#2.1 Rights Agreement dated as of October 24, 1996 between the Registrant and The
Bank of New York.
#2.2 Form of Certificate of Designations of Series A Preferred Stock (included as
Exhibit A to Exhibit 2.1 hereof).
#2.3 Specimen Form of Rights Certificate (included as Exhibit B to Exhibit 2.1
hereof).
#2.4 Summary of Rights Plan (included as Exhibit C to Exhibit 2.1 hereof).
#3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant.
#3.2 Form of Amended and Restated By-laws of the Registrant.
#4.1 Specimen of Common Stock Certificate.
#5 Opinion of Shack & Siegel, P.C., counsel for the Registrant.
#10.1 Manufacturing and Services Agreement dated as of July 1, 1996 between WMS
Industries Inc. and the Registrant.
#10.2 Tax Sharing Agreement dated as of July 1, 1996 among WMS Industries Inc.,
Midway Games Inc., Midway Home Entertainment Inc., Midway Interactive Inc.,
Atari Games Corporation and Tengen Inc.
#10.3 Registration Rights Agreement dated as of July 1, 1996 between WMS Industries
Inc. and the Registrant.
#10.4 Patent License Agreement dated as of July 1, 1996 between the Registrant and
Williams Electronics Games, Inc.
#10.5 Employment Agreement dated as of July 1, 1996 between Mr. Neil D. Nicastro
and the Registrant.
#10.6 Employment Agreement dated April 29, 1994 between Byron C. Cook and Midway
Home Entertainment Inc.
#10.7 Stock Option Plan of the Registrant.
#10.8 Form of Indemnity Agreement authorized to be entered into between the
Registrant and each Officer and Director of the Registrant.
+10.9 GTIS Master Option and License Agreement by and among WMS Industries, Inc.,
Williams Electronics Games, Inc., the Registrant and Midway Home
Entertainment Inc., and GT Interactive Software Corp. dated December 28,
1994.
+10.10 Amendment to GTIS Master Option and License Agreement by and among WMS
Industries Inc., Williams Electronics Games, Inc., the Registrant and Midway
Home Entertainment Inc., and GT Interactive Software Corp. dated March 31,
1995.
+10.11 Second Amendment to GTIS Master Option and License Agreement by and among WMS
Industries Inc., Williams Electronics Games, Inc., the Registrant and Midway
Home Entertainment Inc., and GT Interactive Software Corp. dated March 27,
1996.
+10.12 GTIS Master Option and License Agreement (Home Video Games) by and among WMS
Industries Inc., Williams Electronics Games, Inc., the Registrant and Midway
Home Entertainment Inc., and GT Interactive Software Corp. dated March 31,
1995.
+10.13 Amendment to GTIS Master Option and License Agreement (Home Video Games) by
and among WMS Industries Inc., Williams Electronics Games, Inc., the
Registrant and Midway Home Entertainment Inc., and GT Interactive Software
Corp. dated March 27, 1996.
+10.14 Master Option and License Agreement for Atari Home Video Games dated March
27, 1996, between WMS Industries Inc. and GT Interactive Software Corp.
+10.15 Master Option and License Agreement for Atari PC Games dated March 27, 1996,
between WMS Industries Inc. and GT Interactive Software Corp.
</TABLE>
II-2
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------- -----------------------------------------------------------------------------
<C> <S>
#10.16 Stock Purchase Agreement dated as of February 23, 1996 between Warner
Communications, Inc. and Williams Interactive Inc.
#10.17 Credit Agreement dated as of October 15, 1996 between the Registrant and Bank
of America Illinois.
#21 Subsidiaries of the Registrant.
#23.1 Consent of Shack & Siegel, P.C. (included in Exhibit 5 hereof).
#23.2 Consent of Ernst & Young LLP.
#24 Power of Attorney.
#27 Financial Data Schedule (filed with EDGAR version only).
</TABLE>
- ---------------
+ Confidential treatment requested.
# Previously filed.
(b) Financial Statement Schedules
The following combined financial statement schedules are included in Part
II of this Registration Statement and should be read in conjunction with the
combined financial statements and notes thereto:
Report of Independent Auditors........................................ F-2
Schedule II -- Valuation and Qualifying Accounts...................... S-2
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in such
denomination and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement (333-11919)
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on October 29, 1996.
MIDWAY GAMES INC.
(Registrant)
By: /s/ NEIL D. NICASTRO
------------------------------------
Neil D. Nicastro,
Chairman of the Board, President,
Chief Executive Officer
and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement (333-11919) has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<C> <S> <C>
/s/ NEIL D. NICASTRO Chairman of the Board, October 29, 1996
- ------------------------------------------ President, Chief Executive
Neil D. Nicastro Officer and Chief Operating
Officer (Principal Executive
Officer) and Director
/s/ HAROLD H. BACH, JR.* Executive Vice October 29, 1996
- ------------------------------------------ President -- Finance,
Harold H. Bach, Jr. Treasurer and Chief Financial
Officer (Principal Financial
and Principal Accounting
Officer) and Director
/s/ BYRON C. COOK* Executive Vice President -- October 29, 1996
- ------------------------------------------ Home Video and Director
Byron C. Cook
/s/ KENNETH J. FEDESNA* Executive Vice President -- October 29, 1996
- ------------------------------------------ Coin-Op Video and Director
Kenneth J. Fedesna
/s/ LOUIS J. NICASTRO* Director October 29, 1996
- ------------------------------------------
Louis J. Nicastro
/s/ WILLIAM C. BARTHOLOMAY Director October 29, 1996
- ------------------------------------------
William C. Bartholomay
/s/ WILLIAM E. MCKENNA Director October 29, 1996
- ------------------------------------------
William E. McKenna
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<C> <S> <C>
/s/ NORMAN J. MENELL Director October 29, 1996
- ------------------------------------------
Norman J. Menell
/s/ HARVEY REICH Director October 29, 1996
- ------------------------------------------
Harvey Reich
/s/ IRA S. SHEINFELD Director October 29, 1996
- ------------------------------------------
Ira S. Sheinfeld
/s/ RICHARD D. WHITE Director October 29, 1996
- ------------------------------------------
Richard D. White
* By: /s/ NEIL D. NICASTRO October 29, 1996
- ------------------------------------------
Neil D. Nicastro
Attorney-In-Fact
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
--------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
#1 Form of Underwriting Agreement........................................
#2.1 Rights Agreement dated as of , 1996 between the Registrant
and The Bank of New York..............................................
#2.2 Form of Certificate of Designations of Series A Preferred Stock
(included as Exhibit A to Exhibit 2.1 hereof).........................
#2.3 Specimen Form of Rights Certificate (included as Exhibit B to Exhibit
2.1 hereof)...........................................................
#2.4 Summary of Rights Plan (included as Exhibit C to Exhibit 2.1
hereof)...............................................................
#3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant............................................................
#3.2 Form of Amended and Restated By-laws of the Registrant................
#4.1 Specimen of Common Stock Certificate..................................
#5 Opinion of Shack & Siegel, P.C., counsel for the Registrant...........
#10.1 Manufacturing and Services Agreement dated as of July 1, 1996 between
WMS Industries Inc. and the Registrant................................
#10.2 Tax Sharing Agreement dated as of July 1, 1996 among WMS Industries
Inc., Midway Games Inc., Midway Home Entertainment Inc., Midway
Interactive Inc., Atari Games Corporation and Tengen Inc. ............
#10.3 Registration Rights Agreement dated as of July 1, 1996 between WMS
Industries Inc. and the Registrant....................................
#10.4 Patent License Agreement dated as of July 1, 1996 between the
Registrant and Williams Electronics Games, Inc. ......................
#10.5 Employment Agreement dated as of July 1, 1996 between Mr. Neil D.
Nicastro and the Registrant...........................................
#10.6 Employment Agreement dated April 29, 1994 between Byron C. Cook and
Midway Home Entertainment Inc. .......................................
#10.7 Stock Option Plan of the Registrant...................................
#10.8 Form of Indemnity Agreement authorized to be entered into between the
Registrant and each Officer and Director of the Registrant............
+10.9 GTIS Master Option and License Agreement by and among WMS Industries,
Inc., Williams Electronics Games, Inc., the Registrant and Midway Home
Entertainment Inc., and GT Interactive Software Corp. dated December
28, 1994..............................................................
+10.10 Amendment to GTIS Master Option and License Agreement by and among WMS
Industries Inc., Williams Electronics Games, Inc., the Registrant and
Midway Home Entertainment Inc., and GT Interactive Software Corp.
dated March 31, 1995..................................................
+10.11 Second Amendment to GTIS Master Option and License Agreement by and
among WMS Industries Inc., Williams Electronics Games, Inc., the
Registrant and Midway Home Entertainment Inc., and GT Interactive
Software Corp. dated March 27, 1996...................................
+10.12 GTIS Master Option and License Agreement (Home Video Games) by and
among WMS Industries Inc., Williams Electronics Games, Inc., the
Registrant and Midway Home Entertainment Inc., and GT Interactive
Software Corp. dated March 31, 1995...................................
+10.13 Amendment to GTIS Master Option and License Agreement (Home Video
Games) by and among WMS Industries Inc., Williams Electronics Games,
Inc., the Registrant and Midway Home Entertainment Inc., and GT
Interactive Software Corp. dated March 27, 1996.......................
+10.14 Master Option and License Agreement for Atari Home Video Games dated
March 27, 1996, between WMS Industries Inc. and GT Interactive
Software Corp. .......................................................
+10.15 Master Option and License Agreement for Atari PC Games dated March 27,
1996, between WMS Industries Inc. and GT Interactive Software
Corp. ................................................................
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
--------- ---------------------------------------------------------------------- ----------
<C> <S> <C>
#10.16 Stock Purchase Agreement dated as of February 23, 1996 between Warner
Communications, Inc. and Williams Interactive Inc. ...................
#10.17 Credit Agreement dated as of October 15, 1996 between the Registrant
and Bank of America Illinois..........................................
#21 Subsidiaries of the Registrant........................................
#23.1 Consent of Shack & Siegel, P.C. (included in Exhibit 5 hereof)........
#23.2 Consent of Ernst & Young LLP..........................................
#24 Power of Attorney.....................................................
#27 Financial Data Schedule (filed with EDGAR version only)...............
</TABLE>
- ---------------
+ Confidential treatment requested.
# Previously filed.
<PAGE> 1
Exhibit 10.9
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A CONFIDENTIAL TREATMENT REQUEST MADE
PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
GTIS MASTER OPTION AND LICENSE AGREEMENT
This Master Option and License Agreement ("Option Agreement")
is made and entered into the 28th day of December, 1994, by and among WMS
INDUSTRIES INC. ("WMS"), WILLIAMS ELECTRONICS GAMES, INC. ("WEG"); MIDWAY
MANUFACTURING COMPANY ("Midway") and WILLIAMS ENTERTAINMENT INC. ('WEI"), each
being Delaware corporations with offices at 3401 North California Avenue,
Chicago, Illinois 60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware
corporation with offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, WEG, Midway and WEI are wholly-owned subsidiaries of
WMS engaged in the business of designing, manufacturing and selling
coin-operated amusement games and software products for dedicated home game
systems and multipurpose home computers; and
WHEREAS, GTIS is engaged in the business of distributing
software entertainment products for multipurpose home computers; and
WHEREAS, GTIS desires to acquire certain rights from WMS, WEG,
Midway, WEI and other affiliates of WMS with respect to "Games," as such term is
defined herein, and WEG, Midway, WEI and WMS desire to grant such rights to
GTIS;
<PAGE> 2
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. "Accepted Game" shall mean any Game with respect to
which GTIS has received a license or has exercised an option to acquire a
license provided for in Section 2 hereof.
1.2. "Designated Multipurpose Computer Platforms" shall mean
IBM PC or Apple Macintosh or other compatible multipurpose home computers which
utilize floppy disks or CD-ROMs or other stand alone devices which may hereafter
replace or supplement floppy disks or CD-ROMs in all operating systems now known
or hereafter developed or designed for use on the aforesaid multipurpose home
computers. Designated Multipurpose Computer Platforms shall not include
dedicated home game systems, such as those marketed by Nintendo, Sega, Atari,
Sony, etc.
1.3. "First Release" or "First Released" shall have the
meaning ascribed in Section 2.4 hereof.
1.4. "Game" shall mean any coin-operated video game
(including kits), any home video game and any on- line game, released or
intended to be released, by any member of the WMS Group for sale in commercial
quantities in the normal course of business. Home video games shall include
games designed for play on dedicated home game systems, such as those marketed
by Nintendo, Sega, Atari, Sony, etc. as well as on multipurpose home computers,
such as those marketed by IBM and Apple.
1.5. "Home Computer Software Distribution and License
Agreement" shall mean an agreement for the license of an Accepted Game for use
solely on Designated
2
<PAGE> 3
Multipurpose Computer Platforms in the form of Exhibit A annexed hereto,
as the same may be amended from time to time by written agreement of the parties
thereto.
1.6. "Initial Option Period" shall have the meaning ascribed
in Section 2.1 hereof.
1.7. "Interim Period Games" shall have the meaning ascribed
in Section 2.1 hereof.
1.8. "New Game Option Notice Date" shall have the meaning
ascribed in Section 2.4 hereof.
1.9. "Option and Advance Fee" shall have the meaning
ascribed in Section 3 hereof.
1.10. "Previously Developed Games" shall have the meaning
ascribed in Section 2.3 hereof.
1.11. "Technically Acceptable Master Disk" shall mean a
completed and functioning CD-ROM Master Disk or floppy disk for the Accepted
Game in a format substantially ready to be reproduced and manufactured for
retail distribution and the instruction manual therefor. The Accepted Game
contained in the master disk will have been alpha and beta tested and all known
material bugs and defects will have been corrected.
1.12. "WMS Group" shall mean WMS, WEG, Midway and WEI, or
any subsidiary, affiliate or other entity, a majority of whose capital stock is
owned directly or indirectly by WMS, WEG, Midway or WEI or with respect to which
during the term of this Agreement, WMS, directly or indirectly, has the legal
power, without the consent of any third party, to direct the acquisition of
rights to or exploitation of Games on Designated Multipurpose
3
<PAGE> 4
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Computer Platforms.
2. GRANT AND TERMINATION OF OPTION; EXERCISE OF OPTION.
2.1. The WMS Group hereby grants to GTIS a first option to
acquire a license, in the form of the Home Computer Software Distribution and
License Agreement, to manufacture, distribute and sell versions of the Game for
use solely on Designated Multipurpose Computer Platforms, with respect to (i)
Previously Developed Games, (ii) new Games First Released by the WMS Group
during the three (3) year period (subject to extension as provided below)
commencing March 22, 1995 and expiring March 31, 1998 (the "Initial Option
Period") and (iii) Games which are offered to Acclaim Entertainment, Inc.
("Acclaim") between the date hereof and March 21, 1995, but are not accepted by
Acclaim ("Interim Period Games"). If either of the "Extension Events" described
below shall have occurred during the Initial Option Period, the option period
shall be deemed extended to March 31, 1999. Extension Events shall mean either
(i) the WMS Group shall have received not less than * Dollars in the aggregate
from royalties paid under Home Computer Software Distribution and License
Agreements and the Option and Advance Fee or from voluntary payments by GTIS,
provided that the amount of voluntary payments which may be utilized to
calculate the attainment of the Extension Event shall not exceed * Dollars; or
(ii) the market value of the shares of stock which may be acquired by WMS upon
exercise of the Warrants provided for in Section 4 hereof shall have increased
by at least * Dollars as compared to the market value of such shares on the date
the Warrants were issued and an amount of such shares have been purchased or are
currently purchasable under the Warrants and have been sold or are publicly
saleable by WMS as have permitted or
4
<PAGE> 5
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
will permit WMS to realize such * Dollars increase. For purposes hereof shares
shall be considered publicly saleable (i) if they are saleable under Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
or any similar rule hereafter in effect; (ii) if, in the opinion of counsel to
GTIS, such shares may be publicly sold under Section 4(1) or otherwise publicly
sold without registration under the Securities Act; (iii) if such shares have
been registered for sale and are saleable under an effective registration
statement duly filed under the Securities Act; (iv) if WMS has a demand
registration right then available under the registration rights agreement
annexed hereto as Exhibit B; or (v) if GTIS has duly exercised the GTIS Call as
that term is defined in such registration rights agreement. In calculating the
amount the WMS Group has received for purposes of clause (i) above, payments
made with royalty reports within 45 days after the end of the Initial Option
Period shall be included.
2.2. The WMS Group shall not grant a license to any third
parties to manufacture, distribute and sell versions of a Game for use on
Designated Multipurpose Computer Platforms if such Game would be subject to
GTIS' first option right specified in Section 2.1 hereof until such time as GTIS
shall have declined to acquire a license, or the option periods specified in
Sections 2.4 and 2.5 hereof, whichever is applicable, shall have expired, or the
applicable Home Computer Software License Agreement shall otherwise permit. GTIS
understands, acknowledges and agrees that (i) with respect to Games manufactured
by the WMS Group under license from third parties, the rights granted by the WMS
Group to GTIS cannot exceed the rights obtained by and will be subject to the
limitations imposed on the WMS Group from such third party and the form of Home
Computer Software Distribution and License
5
<PAGE> 6
Agreement will be deemed modified to the extent so required; (ii) although the
WMS Group is developing Games in the normal course of business, the WMS Group is
under no obligation to develop Games or to present any minimum number of Games
to GTIS under this Agreement; (iii) until March 21, 1995, Acclaim Entertainment,
Inc. ("Acclaim") has a first option to license Games for use on home computers
and GTIS' rights under this Agreement shall be subject to Acclaim's rights; and
(iv) Williams/Nintendo, Inc. (a joint venture company in formation owned by a
wholly owned subsidiary of WMS and Nintendo of America Inc.) has been granted a
first right of negotiation with respect to the exclusive right to produce and
distribute certain coin-operated games for all formats, including home
computers, if those games are implemented for play upon certain coin-operated
hardware systems proprietary to Nintendo and its licensors.
2.3. Attached hereto as Schedule 1 is a list of the titles
of certain Games heretofore developed by the WMS Group with respect to which the
WMS Group has the right to grant licenses to GTIS to manufacture, distribute and
sell versions of the Game for use on Designated Multipurpose Computer Platforms
("Previously Developed Games"). Within sixty (60) days after the date hereof,
GTIS and WMS Group shall enter into Home Computer Software Distribution and
License Agreements with respect to each of the Previously Developed Games. The
WMS Group at its own cost and expense will use reasonable efforts to complete
development of Technically Acceptable Master Disks for such Previously Developed
Games for play on IBM PC and compatible home computers, and for Troy Aikman NFL
Football for Macintosh computers as well, by the dates and in the formats set
forth on Schedule 1. If GTIS desires Technically Acceptable Master Disks to be
developed for play on Apple Macintosh home computers, it will notify WMS within
60 days of the date hereof and WMS and GTIS will agree
6
<PAGE> 7
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
jointly as to the development budget and the identity of the proposed developer.
GTIS shall pay to WMS * of the actual costs of such development of Technically
Acceptable Master Disks for Apple Macintosh home computers simultaneously with
receipt of such disks and a reasonably detailed written summary of the
development costs, none of which payment shall be recoupable by GTIS or
repayable to GTIS in any manner or for any reason. The provisions of Section 2.7
hereof with respect to budget overruns shall apply to the development budget
referred to in this Section 2.3, to the extent applicable.
2.4. With respect to Games First Released by the WMS Group
for the coin-operated, home video or on-line markets after March 22, 1995,
beginning with Mortal Kombat III, or Interim Period Games, the WMS Group shall
notify GTIS in writing as to the existence of a Game within thirty (30) days
after the WMS Group has begun to ship the Game for use commercially in the
ordinary course of business (and not merely for the WMS Group's test purposes),
or within thirty (30) days after the date Acclaim's option rights expire
unexercised, whichever is later. The date of such notice is hereinafter referred
to as the "New Game Option Notice Date." A Game shall be deemed First Released
by the WMS Group on the date of the first commercial shipment in the normal
course of business and with respect to on-line Games when such Games are first
commercially sold to subscribers to the on-line service. If the WMS Group does
not actually make a commercial shipment of a Game notwithstanding its original
intention to do so, then the WMS Group shall notify GTIS of its decision not to
make such shipments and the New Game Option Notice Date for such Game shall be
deemed to be the date of such notice. Each notice given in accordance with this
Section 2.4
7
<PAGE> 8
(i) shall identify the Game, (ii) shall describe in reasonable detail its
characteristics and method of play, and (iii) shall set forth a proposed budget
and time frame for developing Technically Acceptable Master Disks for such game
for play on Designated Multipurpose Computer Platforms, and the identity of the
proposed developer. GTIS shall have a reasonable opportunity to consult with the
WMS Group prior to the WMS Group determining the proposed budget, time frame and
developer, but the final decision shall be made by WMS. GTIS acknowledges that
Mortal Kombat III is currently in process of development and hereby consents to
the designation of Sculptured Software, Inc. as the developer. Each such notice
relating to a Game manufactured by the WMS Group pursuant to a license from or
other agreement with any third party shall set forth a summary of any material
limitations upon the scope of the license in respect thereof which may be
granted to GTIS hereunder, the amount or method of determining third party
royalties payable thereunder and the material terms of such license or other
agreement applicable to platforms other than Designated Multipurpose Computer
Platforms. With respect to each Game as to which GTIS receives written notice as
hereinabove provided, GTIS shall have a period of ninety (90) days from the New
Game Option Notice Date to notify WMS in writing that it elects to exercise its
option to license the Game. Upon receipt of such notice from GTIS, the WMS Group
will proceed to develop or retain a third party to develop a Technically
Acceptable Master Disk for such Game for play on one or more Designated
Multipurpose Computer Platforms as identified in the budget and will use
reasonable efforts to complete or cause the completion of such development
within twelve (12) months of receipt of such notice from GTIS. In addition to
any other payments made hereunder or under any Home Computer Software
Distribution and License Agreement, subject to the provision of Paragraph
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
2.7 below, GTIS shall pay to WMS * of the actual costs of such code development
simultaneously with receipt of a Technically Acceptable Master Disk and a
reasonably detailed written summary of the development costs, none of which
payment shall be recoupable by GTIS or repayable to GTIS in any manner or for
any reason. It is understood that the development budget shall include a
compensation expense of up to * if the WMS Group employs a dedicated in-house
producer for the purpose of such development.
2.5. If, by itself, or through use of a third party
developer, the WMS Group determines to develop or acquire a Game for play on
multipurpose home computers that it has not theretofore developed or acquired
for the coin-operated or dedicated home game player market, it shall notify GTIS
in writing as to its intention, which notice shall describe in reasonable detail
the proposed characteristics of the Game and shall set forth an estimated budget
and time frame for developing Technically Acceptable Master Disks for such game
for play on one or more Designated Multipurpose Computer Platforms and the
identity of the proposed developer. Each such notice relating to a Game the
rights to which are derived from a license or other agreement with a third party
shall set forth a summary of any material limitations upon the scope of the
license in respect thereof which may be granted to GTIS hereunder, the amount or
method of determining third party royalties payable thereunder and the material
terms of such license or other agreement applicable to platforms other than
Designated Multipurpose Computer Platforms. GTIS shall have an opportunity to
consult with the WMS Group prior to the WMS Group determining the proposed
budget, time frame and developer, but the final decision shall be made by WMS.
GTIS shall have a period of fifteen (15) days from the date of such notice
9
<PAGE> 10
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to notify WMS in writing that it elects to exercise its option to license the
Game. Upon receipt of such notice from GTIS, the WMS Group will proceed to
develop or retain a third party to develop a Technically Acceptable Master Disk
for such Game for play on one or more Designated Multipurpose Computer Platforms
as identified in the budget and will use reasonable efforts to complete or cause
the completion of such development within the estimated time frame set forth in
the notice. In addition to any other payments made hereunder or under any Home
Computer Software Distribution and License Agreement, subject to the provisions
of Paragraph 2.7 below, GTIS shall pay to WMS * of the actual costs of such code
development simultaneously with receipt of a Technically Acceptable Master Disk
and a reasonably detailed written summary of the development costs, none of
which payment shall be recoupable by GTIS or repayable to GTIS in any manner or
for any reason. It is understood that the development budget shall include a
compensation expense of up to * if the WMS Group employs a dedicated in-house
producer for the purpose of such development.
2.6. All Previously Developed Games and any Game as to which
GTIS has exercised its option within the notice periods specified in Sections
2.4 and 2.5 above shall become an Accepted Game for all purposes of this
Agreement. With respect to each Accepted Game, GTIS and the member of the WMS
Group which is manufacturing such Game shall enter into a Home Computer Software
Distribution and License Agreement which shall be dated the earlier of: the date
GTIS Shall have given notice of its acceptance thereof, or the date which is
sixty (60) days following the date of the option notice. If either of such
parties shall wrongfully refuse to enter into a Home Computer Software
Distribution and License Agreement
10
<PAGE> 11
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
with respect to any Accepted Game, then, in addition to any other rights of the
non-defaulting party hereunder, at the option of the non-defaulting party, such
Home Computer Software Distribution and License Agreement shall be deemed to
have been entered into as of the date on which GTIS shall have exercised its
option to acquire the license of such Accepted Game as provided herein. GTIS
understands and agrees that it will have no rights whatsoever in respect of any
Game which does not become an Accepted Game in accordance with the terms of this
Agreement and for which a Home Computer Software Distribution and License
Agreement is not duly executed (or deemed executed as provided above), and the
WMS Group may exploit its rights in any Game which does not become an Accepted
Game in any manner it sees fit, free and clear of this Agreement.
2.7. The parties hereto acknowledge that notwithstanding
efforts to produce reliable development budgets under Sections 2.4 and 2.5
hereof, in certain instances the actual costs of development may exceed the
budgeted costs. In those instances, WMS shall notify GTIS of the projected
budget overrun (the "Overrun Notice") promptly after WMS becomes aware of such
overrun.
2.7.1. The following provisions shall apply to budget
overruns in respect of Games which became Accepted Games under Section 2.4
hereof ("Section 2.4 Games"). If the actual cost of development of a Section 2.4
Game being developed by a third party developer is not more than * of the budget
approved by GTIS, GTIS will pay WMS * of such actual costs as provided in
Section 2.4 hereof. If the actual costs of development of a Section 2.4 Game
exceed * of the budget with respect to a Game being developed by a third
11
<PAGE> 12
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
party developer or * of the budget with respect to a Game being developed
in-house by the WMS Group, whichever is applicable, GTIS shall have the right,
by notice to WMS given within ten (10) days of receipt by GTIS of the Overrun
Notice, to elect to bear * of the cost of such overrun or to decline to do so. A
failure by GTIS to give such notice within such ten (10) days shall be deemed an
election to decline to bear such costs. If GTIS so declines, WMS shall be
entitled to elect to (i) abandon the development, in which event WMS shall bear
the entire cost of the development, or (ii) proceed with the development with
GTIS, in which case GTIS shall pay * of (A) the actual costs of the development
up to * of the budget with respect to a Game being developed by a third party
developer or (B) * of the budget with respect to a Game being developed in-house
by the WMS Group, whichever is applicable, as provided in Section 2.4 and WMS
shall bear the balance of the costs of such development.
2.7.2. The following provisions shall apply to budget
overruns in respect of Games which become Accepted Games under Section 2.5
hereof ("Section 2.5 Games"). If the actual cost of development of a Section 2.5
Game being developed by a third party developer is not more than * of the budget
approved by GTIS, GTIS will pay WMS * of such actual costs as provided in
Section 2.5 hereof. If the actual costs of development of a Section 2.5 Game
exceed * of the budget with respect to a Game being developed by a third party
developer or * of the budget with respect to a Game being developed in-house by
the WMS Group, whichever is applicable, GTIS shall have the right, by notice to
WMS given within ten (10) days of receipt by GTIS of the Overrun Notice, to
elect to bear * of the cost of such overrun or to decline to do so. A failure by
GTIS to give such notice within such ten (10)
12
<PAGE> 13
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
days shall be deemed an election to decline to bear such costs. If GTIS so
declines, WMS shall have the right to abandon the development, in which event
WMS shall bear the entire cost of the development, or to elect the options
provided below in this Section 2.7.2. WMS may elect (i) to proceed with the
development with GTIS in which case GTIS shall pay * of (A) the actual costs of
the development up to * of the budget with respect to Games being developed by a
third party developer or (B) * of the budget with respect to Games being
developed in-house, whichever is applicable, and WMS shall bear the balance of
the costs of such development; or (ii) in the case of a Section 2.5 Game being
developed by a third party developer who is not contemporaneously developing the
Game for WMS for other platforms, such as coin-operated or dedicated home games
systems, WMS may elect to proceed with the development without GTIS involvement,
in which case WMS shall bear the entire costs of development, and the Game shall
no longer be deemed an Accepted Game and GTIS shall have no further rights in
such Game.
2.7.3. Anything herein to the contrary notwithstanding,
on notice to GTIS and with consent of GTIS, which consent may not be
unreasonably withheld, WMS may elect to terminate development at any time prior
to delivery to GTIS of a Technically Acceptable Master Disk, at no cost to GTIS,
if WMS determines that further development work is not technically or
economically desirable. If WMS should thereafter determine to recommence
development work, it will promptly notify GTIS which will have the option on
fifteen (15) days' notice to WMS to participate in such renewed development on
the same terms and conditions as if the original development had continued
uninterrupted. If GTIS withholds its consent to
13
<PAGE> 14
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
such termination of development pursuant to this Section 2.7.3, GTIS shall (i)
promptly pay to WMS * of the costs of development to the date of WMS notice of
intent to terminate (excluding the budgeted compensation expense of the WMS
Group's dedicated in-house producer, if any); (ii) take over responsibility for
development of a Technically Acceptable Master Disk with the developer; and
(iii) bear the costs of development in excess of * of the budget. Upon receipt
by WMS of a notice from GTIS that GTIS has received a Technically Acceptable
Master Disk with respect to the Game, WMS shall pay to GTIS the amount, if any,
by which * of the actual costs of development up to * of the budget exceeds the
development costs theretofore paid by the WMS Group.
2.8. If GTIS has not exercised its option under Sections 2.4
or 2.5 above with respect to a Game and if, before a member of the WMS Group
enters into a binding agreement with a third party for Designated Multipurpose
Computer Platform rights in such Game, there shall be a material change in
design, a material decrease in the development budget or a change in the
identity of the developer from those presented to GTIS before its declination to
exercise its option, the WMS Group will present such changed information to GTIS
who shall have thirty (30) days after receipt of such information to determine
to elect to exercise its option.
2.9. GTIS acknowledges that the WMS Group manufactures and
sells Games for many different entertainment platforms, including coin-operated
games and home games of all types, and that any Games in respect of which GTIS
obtains rights hereunder for exploitation on Designated Multipurpose Computer
Platforms, including rights under Section 2.5 hereof, may be developed by the
WMS Group for other entertainment platforms and GTIS will
14
<PAGE> 15
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
have no rights therein.
2.10. WMS agrees to use commercial efforts in its reasonable
judgment, to acquire rights to exploit Games in Designated Multipurpose Computer
Platforms when it acquires rights in Games from third parties or develops rights
in Games internally or through joint ventures. It is understood that with
respect to on-line Games, third parties may require such games to be exclusively
offered on-line, and GTIS shall have no rights hereunder with respect to such
exclusive on-line games.
3. OPTION FEE AND GUARANTIED ADVANCE ROYALTY. In consideration
for the option granted herein and as a guarantied advance royalty, GTIS agrees
to pay to WMS a fee in the amount of * Dollars ("Option and Advance Fee") and to
issue the Warrants as set forth in Paragraph 4 below. The Option and Advance Fee
shall be payable in installments as follows: * Dollars shall be paid by wire
transfer to WMS in immediately available funds on the date hereof; * Dollars
shall be paid on or before December 28, 1995 and * Dollars shall be paid on or
before December 28, 1996. It is understood that under no circumstances shall the
WMS Group be required to repay any portion of such amounts nor shall GTIS be
entitled to any set off or to claim the right not to pay any portion of such
amounts for any reason; provided that GTIS shall be entitled to recoup such
payments out of royalties, to the extent provided in the Home Computer Software
Distribution and License Agreements, entered into pursuant to this Agreement. If
the payment due on December 28, 1995 is not paid in full when due, the payment
otherwise due December 28, 1996 shall become immediately due and payable. The
obligation to make such deferred payments are being fully secured by a clean
standby letter of
15
<PAGE> 16
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
credit in the amount of * Dollars, issued by Republic National Bank delivered to
WMS (which may be accomplished by delivery to WMS counsel, Shack & Siegel, P.C.)
not later than December 29, 1994. If such letter of credit is not so delivered
in form and substance satisfactory to WMS, this Agreement shall be of no further
force and effect and WMS shall return to GTIS any amounts theretofore paid by
GTIS to WMS. GTIS shall be responsible for all costs and expenses, including
legal fees, which may be incurred by WMS in connection with its collection of
the deferred payments. WMS shall permit GTIS from time to time to exchange the
original or any substitute letters of credit for other substitute letters of
credit, provided that the newest substitute letters of credit are (i) issued by
the aforesaid bank or another bank acceptable to WMS, (ii) the amounts of the
newest substitute letters of credit are not less than the amounts then owed with
respect to the above described deferred payments; and (iii) the newest
substitute letters of credit otherwise contain the same terms and conditions as
are contained in the letter of credit for which it is being substituted.
4. WARRANTS. GTIS agrees that simultaneously with the closing
of any public offering of common stock, or of preferred stock convertible into
common stock, WMS will be issued stock purchase warrants and receive a
registration rights agreement, in substantially the forms annexed hereto as
Exhibit B, with the number of shares purchasable upon exercise of the Warrants
being equal to * Dollars divided by the initial public offering price of the
common stock sold, or the conversion price of preferred stock, whichever is
applicable. The Warrants shall be exercisable for the class of common stock
issued and sold by GTIS pursuant to an effective registration statement under
the Securities Act in an initial public offering (or the
16
<PAGE> 17
class of common stock receivable upon conversion of any convertible preferred
stock so issued and sold in an initial public offering). GTIS shall have no
obligation to undertake or complete an initial public offering, and if it does
not, GTIS will have no liability whatsoever to the WMS Group and the WMS Group
shall have no right to any compensation in lieu of the Warrants referred to
herein. The Warrants and the shares issuable thereunder are being and will be
acquired by the WMS Group for investment and not with a view to the distribution
thereof by the WMS Group, and such warrants and shares will be "restricted
securities" within the meaning of the Securities Act. The WMS Group will not
sell or dispose of such warrants or shares except in compliance with the federal
securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE WMS GROUP. The members
of the WMS Group represent and warrant that this Agreement has been duly
authorized, executed and delivered by each member of the WMS Group; each such
member has the full power and authority to enter into this Agreement and to
perform its obligations hereunder and this Agreement constitutes the valid and
binding obligation of each member of the WMS Group, enforceable in accordance
with its terms, and the making of this Agreement by the member of the WMS Group
does not violate or conflict with any agreement, right or obligation existing
between any member of the WMS Group and any other person, firm or corporation,
including, without limitation, Acclaim.
6. REPRESENTATIONS AND WARRANTIES OF GTIS. GTIS represents and
warrants that this Agreement has been duly authorized, executed and delivered by
GTIS; GTIS has the full power and authority to enter into this Agreement and to
perform its obligations hereunder and this Agreement constitutes the valid and
binding obligation of GTIS enforceable
17
<PAGE> 18
in accordance with its terms; and the making of this Agreement by GTIS does not
violate or conflict with any agreement, right or obligation existing between
GTIS and any other person, firm or corporation.
7. CONFIDENTIAL INFORMATION. GTIS shall keep in confidence and
not disclose to any third party, without the written permission of WMS, the
terms of this Agreement and the proprietary information of the WMS Group made
known to it under this Agreement, except GTIS may make such disclosures to
General Atlantic Partners who have excuted a confidentiality agreement with
GTIS. Likewise, the WMS Group shall keep in confidence and not disclose to any
third party, without the written permission of GTIS, the terms of this Agreement
and the proprietary information of GTIS made known to it under this Agreement.
This requirement of confidentiality shall not apply to information that is (a)
permitted to be disclosed under a Home Computer Software Distribution and
License Agreement; (b) in the public domain through no wrongful act of the
receiving party; (c) rightfully received by the receiving party from a third
party who is not bound by a restriction of nondisclosure; (d) already in the
receiving party's possession without restriction as to disclosure; or (e) is
required to be disclosed by applicable rules and regulations of government
agencies or judicial bodies. WMS or GTIS shall not issue any press release or
other public or trade announcement with respect to the transactions contemplated
by this Agreement unless the issuing party shall have first consulted with the
other with respect thereto and obtained the other's prior written approval
therefor, which approval will not be unreasonably withheld or delayed. The
obligations of confidentiality under this Section 7 shall survive termination of
this Agreement.
8. NOTICES. Any notice, consent, approval, request, waiver or
statement
18
<PAGE> 19
to be given, made or provided for under this Agreement shall be in writing and
deemed to have been duly given (i) by its delivery personally or by express
mail; or (ii) five days after its being mailed, air express, registered or
certified, return receipt requested, in a U.S. Post office addressed as follows:
To GTIS:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 951-3107
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 951-3052
Facsimile Number: (212) 679-6850
To WMS Group:
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
With a copy to:
Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 782-1964
19
<PAGE> 20
or such other address as either party may designate by notice given as
aforesaid.
9. DEFAULT. In the event that GTIS shall default in any of its
obligations to make payment in full hereunder or under any Home Computer
Software Distribution and License Agreement and the WMS Group has provided
notice of such default in accordance with the provisions of Paragraph 8 hereof,
if GTIS has not cured such default in making payments hereunder within fifteen
(15) days of such notice, or within the grace periods provided in the Home
Computer Software Distribution and License Agreement in respect of payments
thereunder, then, in addition to all other rights and remedies of the WMS Group
at law or in equity, at the option of the WMS Group, all rights granted to GTIS
under Paragraph 2 of this Agreement shall be deemed terminated and shall revert
to the WMS Group, provided it is understood that notwithstanding such
termination, the Home Computer Software Distribution and License Agreements
entered or deemed entered into prior to such termination which are not in
default shall remain in full force and effect. No such termination shall in any
way affect or diminish WMS' rights under Paragraphs 3 and 4 hereof. Anything
herein to the contrary notwithstanding, the rights granted to GTIS under
Paragraph 2 of this Agreement shall not be affected by an alleged default by
licensee under a Home Computer Software Distribution and License Agreement
resulting from a bona fide dispute between licensor and licensee provided that
licensee pays all undisputed amounts to licensor and all disputed amounts are
paid into a bona fide third party escrow account.
10. MISCELLANEOUS.
10.1. This Agreement is personal to GTIS and the WMS Group
and may not be assigned, in whole or in part, and none of GTIS' or the WMS
Group's rights or
20
<PAGE> 21
obligations hereunder may be delegated to any person or party without the prior
written consent of the other, except that any party may assign its rights and
obligations to any direct or indirect subsidiary or affiliate of the assigning
party or to any person, firm or corporation owning or acquiring all or
substantially all of the stock or assets of the assigning party, so long as the
assigning party remains liable for its obligations hereunder.
10.2. The entire understanding between the parties hereto
relating to the subject matter hereof is contained herein. This Agreement cannot
be changed, modified, amended or terminated except by an instrument in writing
executed by the parties hereto.
10.3. 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 no waiver shall be
deemed or construed to be a waiver of such terms or conditions for the future or
any subsequent breach thereof.
10.4. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between the WMS Group
and GTIS, and neither the WMS Group nor GTIS 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.
10.5. This Agreement shall be governed by the laws of the
State of Illinois applicable to contracts made and to be wholly performed in the
State of Illinois.
10.6. 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,
21
<PAGE> 22
either such provision will be deemed amended to conform to such laws or
regulations without materially altering the intention of the parties or it shall
be stricken and the remainder of this Agreement shall remain in full force and
effect.
10.7. This Agreement may be executed in counterparts each
of which shall be deemed an original and when taken together shall be deemed one
and the same document.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
WMS INDUSTRIES INC
By:/s/ Neil D. Nicastro
----------------------------
WILLIAMS ELECTRONICS GAMES, INC.
By:/s/ Neil D. Nicastro
----------------------------
MIDWAY MANUFACTURING COMPANY
By:/s/ Neil D. Niastro
----------------------------
WILLIAMS ENTERTAINMENT INC.
By:/s/ Byron Cook
----------------------------
GT INTERACTIVE SOFTWARE CORP.
By:/s/ Ron Chaimowitz
----------------------------
23
<PAGE> 24
SCHEDULE 1
Previously Developed Games
<TABLE>
<CAPTION>
Available Formats
-----------------
Scheduled Date of (IBM PC only except as indicated
Title of Game Code Availability below)(1)
------------- -----------------
<S> <C> <C>
Troy Aikman NFL 12/94 PC CD-ROM/PC Floppy
Football(2)(3)
Fun 'N' Games(4) 12/94 PC CD-ROM
Fun Paint 12/94 PC Floppy
Fun Music 12/94 PC Floppy
Island Casino 5/95 PC CD-ROM
Coin-Op Classic Combination 6/95 PC CD-ROM
(Defender, Robotron, Joust)*
Adams Family Pinball(3) 6/95 PC CD-ROM/PC Floppy
Fish Tales Pinball 8/95 PC CD-ROM/PC Floppy
White Water Pinball 10/95 PC CD-ROM/PC Floppy
Pinball Compilation (Adams 1/96 PC CD-ROM
Family, Fish Tales, White
Water, Fun House)
</TABLE>
- ----------
(1) All games can also be developed for Macintosh as well in accordance
with Section 2.3 of the Agreement, except that no Macintosh in any
format and no IBM PC floppy versions are available for combination of
Defender, Robotron and Joust.
(2) Available also in Macintosh CD-ROM and floppy versions.
(3) Subject to obtaining third party consents which are expected to be
obtained in the normal course.
(4) Sony may have the option to obtain worldwide distribution rights with
the exception of North, South and Central America and Japan. If Sony
obtains such rights, the revenues obtained from Sony shall be treated
in the same way as revenues from games exploited by licensor in the
Excluded Asian Countries, as such term is defined in the Home Computer
Software Distribution and License Agreement.
<PAGE> 25
EXHIBIT A
HOME COMPUTER SOFTWARE
DISTRIBUTION AND LICENSE AGREEMENT
AGREEMENT made this ___ day of __________, 199__, by and between GT
INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices at 16 East 40th
Street, New York, New York 10016 (herein called "Licensee") and [MIDWAY
MANUFACTURING COMPANY], [WILLIAMS ELECTRONICS GAMES, INC.] [WILLIAMS
ENTERTAINMENT INC.] a Delaware corporation with offices at 3401 North California
Avenue, Chicago, Illinois 60618 (herein called "Licensor").
W I T N E S S E T H:
WHEREAS, Licensor owns or controls the rights in and to the Licensed
Property (which Licensed Property is hereinafter defined on Schedule "A"
attached hereto);
WHEREAS, Licensee is engaged in the business of manufacturing,
distributing and selling Computer Games (as hereinafter defined; such Computer
Games embodying the Licensed Property shall be hereinafter referred to as the
"Licensed Product"); and
WHEREAS, Licensee desires to use the Licensed Property in connection
with the manufacture, distribution and sale of the Licensed Product;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. The term "Computer Game" is herein defined as any
Computer Software designed to operate on IBM PC or Apple Macintosh or other
compatible multipurpose home computers, using floppy disks or CD-ROM or other
stand alone devices in all operating
<PAGE> 26
systems now known or hereafter developed or designated for use on the aforesaid
multipurpose home computers. Computer Games shall not include, among other
things, Computer Software designed to operate on dedicated home game systems
(e.g. Nintendo, Sega, Atari, Sony, etc. game platforms).
1.2. The term "Computer Software" or "Software" shall mean
any computer software containing substantially full and complete computer game
code, including the source code, the assembly code, the object code and such
data files and other files as are deemed necessary for the Licensed Product to
achieve its functional purpose, whereby data and visual images, with or without
sound, can be manipulated, communicated, reproduced or perceived with the aid of
a computer.
1.3. The term "GTIS Master Agreement" shall mean the GTIS
Master Option and License Agreement dated December 22, 1994, among Licensee, WMS
Industries Inc., Midway Manufacturing Company, Williams Electronics Games, Inc.
and Williams Entertainment Inc.
1.4. The term "Licensed Product" shall have the meaning
ascribed in the second Whereas clause of this Agreement and, as the context may
require, shall also include books which communicate game playing tactics and/or
strategies ("hint books") specifically prepared for Computer Games which shall
also be deemed Licensed Products hereunder and shall be subject to all of the
terms and conditions, including without limitation the royalty provisions,
hereof.
1.5. The term "Licensed Territory" shall have the meaning
ascribed in Section 3 of this Agreement.
1.6. The term "Other Home Computer Software Distribution and
License Agreements" shall have the meaning ascribed in Schedule B.
2
<PAGE> 27
1.7. The term "Previously Developed Game" shall have the
meaning ascribed in the GTIS Master Agreement.
1.8. The words "term of this Agreement" or "period of this
Agreement" or "term hereof" or "so long as this Agreement remains in force" or
words of similar connotation shall include the initial period of this Agreement
and the period of all renewals, extensions, substitutions or replacements of
this Agreement.
1.9. The term "Third Party Fees and Royalties" shall mean
all fees, royalties and other participations of any kind or nature payable by
Licensor to any third party, including developers, licensors and others having
rights in connection with the exploitation of the Licensed Products. There shall
be excluded from the term "Third Party Fees and Royalties" as used herein (1)
any recoupable advances which have already been included in any development
budget or acquisition costs with respect to the Licensed Product which are to be
shared by Licensor and Licensee, in accordance with the terms of the GTIS Master
Agreement and which have not yet been recouped; (2) any fees or royalties
payable to employees or consultants by Licensor or its affiliates with respect
to the development of Licensed Product in house, and (3) any fees, royalties or
other participations payable by Licensor to a developer (but any such payments
payable to other third parties shall not be so excluded) in connection with any
Previously Developed Game. If, with respect to Games other than Previously
Developed Games, Licensor or its affiliates acquires from a third party in one
transaction the rights to exploit a Game on multiple platforms, unless Licensee
shall otherwise agree, Licensor shall fund advances, if any, paid to such third
party, and any such advances shall be excluded from the term Third Party Fees
and Royalties; provided, however, that if such advances are recoupable by
Licensor or its affiliates from future royalties payable to such third party,
then Third Party Fees and Royalties shall include such royalties which would
otherwise be payable to such third
3
<PAGE> 28
party were it not for such right of recoupment.
2. GRANT OF LICENSE.
2.1. Licensor hereby grants and Licensee hereby accepts, for
the term of this Agreement and subject to the terms hereinafter set forth, the
exclusive license to utilize the Licensed Property solely in connection with the
manufacture, distribution and sale of the Licensed Products in the Territory.
Licensee shall have the right to sublicense any of the rights granted to
Licensee hereunder with Licensor's prior written consent, which consent shall
not be unreasonably withheld or delayed. Without limiting the generality of the
foregoing, (a) Licensor shall not unreasonably withhold or delay its consent to
proposals by Licensee to sublicense its rights hereunder to third party personal
computer hardware or computer peripheral device manufacturers for the purpose of
"bundling" the Licensed Products together with such hardware products for
distribution only within the Licensed Territory and (b) Licensee shall not have
the right to sublicense its rights hereunder (and Licensor may withhold its
consent to any proposed sublicense) to any third party for the purpose of
distributing Licensed Products to mass market retailers in the United States. It
is understood that the term Licensed Products does not include Computer Software
designed for play on dedicated home video game systems, such as those
manufactured by Nintendo, Sega, Sony or Atari, or any other medium of
exploitation, including handheld games, over the air, cable or fiber-optic
transmission or any ancillary rights related thereto, all of which remain the
sole property of Licensor except as otherwise specifically provided below. No
license is granted hereunder for the manufacture, sale or distribution of
Licensed Products to be used as premiums, in combination sales, as giveaways or
to be disposed of under similar methods of merchandising, except only that
Licensee shall have the right, subject to rights of third parties in the
Licensed Property, to distribute Licensed Products as
4
<PAGE> 29
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
premiums, combination sales or giveaways solely (a) subject to Licensor's
consent, which shall not unreasonably be withheld or delayed, in connection with
the sale and distribution of other Computer Games licensed to Licensee by
Licensor or its affiliates under Other Home Computer Software Distribution and
License Agreements, and (b) with respect to free or promotional goods in the
quantities set forth on Schedule B. [If Licensee's rights in Licensed Products
are derived under Section 2.5 of the GTIS Master Agreement and relate to rights
acquired from third parties (as compared to rights to product developed in-house
by Licensor or its affiliates), add the following: Upon payment of the * of the
costs of the development as provided in Section 2.5 of the GTIS Master
Agreement, Licensee shall be entitled to share in * of the net profits derived
by Licensee from the exploitation of ancillary merchandising rights to the
Licensed Product and Licensee shall be entitled to direct the exploitation of
such ancillary merchandising rights (but not hand held games) after consultation
and subject to Licensor's consent, which shall not unreasonably be withheld or
delayed. Licensee shall not be entitled to exploit or share in the profits
derived from any exploitation of games whether or not having the same or similar
title or play characteristics or using similar Computer Software, in other game
platforms, such as coin-operated games or dedicated home game systems, or in any
ancillary rights relating thereto. If ancillary merchandising rights apply to or
are derived from the exploitation of games which are designed to operate on
multiple platforms (irrespective of the chronological order in which such games
are released for such platforms), then the Licensor and Licensee will consult
with each other to determine a fair and appropriate method of exploiting the
ancillary merchandising rights and the respective participations of Licensor and
Licensee therein. For the purposes
5
<PAGE> 30
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
hereof, "net profits" shall be calculated by subtracting from the actual monies
received by Licensor or Licensee, as the case may be, from the exploitation of
the ancillary merchandising rights to the Licensed Product (i) an amount equal
to * of such receipts, representing Licensor's or Licensee's allocation of
overhead expenses, and (ii) all Third Party Fees and Royalties payable by
Licensor in connection therewith. Licensor shall account to Licensee not less
frequently than quarterly with respect to the calculation and payment of its
share of net profits as provided above.]
2.2. This license does not include any rights to subsequent
versions of the Licensed Property (so- called "sequels" or "derivatives"), such
rights being retained by Licensor, except as the same are otherwise required to
be offered to Licensee under the GTIS Master Agreement or as provided in the
following sentence. If any member of the WMS Group, as that term is defined in
the GTIS Master Agreement, shall, within a period beginning not later than six
(6) months after Licensee has ceased selling a Licensed Product acquired under
Section 2.5 of the GTIS Master Agreement in reasonable commercial quantities,
begin the development, in-house or through third-party developers, of a sequel
or derivative of such Licensed Product which utilizes more than * of the same
source code as such Licensed Product or substantially the same name as such
Licensed Product, then such sequel or derivative shall be offered to Licensee on
the same terms and conditions as a Game would have been offered to Licensee
during the Initial Option Period under the GTIS Master Agreement.
3. TERRITORY.
3.1. Licensee shall be entitled to manufacture, distribute
and sell the
6
<PAGE> 31
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Licensed Products in all countries throughout the world, except (a) North and
South Korea, Japan, Hong Kong, China (PRC), Taiwan (ROC), Malaysia, Singapore,
Philippines, Indonesia, Thailand, India and Pakistan, (the "Excluded Asian
Countries") and (b) countries or locations which are excluded under the terms of
any license agreement between Licensor and any third party having rights to the
Licensed Property. The territory in which Licensee shall be entitled to
manufacture, sell and distribute the Licensed Products as specified above is
herein referred to as the "Licensed Territory."
3.2. Licensor shall have the exclusive right to license any
of its rights with respect to the Licensed Property in the Excluded Asian
Countries to third parties, subject to Licensee's prior written consent, which
consent shall not be unreasonably withheld or delayed. With respect to the
exploitation by Licensor of the Licensed Property in the Excluded Asian
Countries, Licensee shall be entitled to share in * of the net profits (as
calculated in Section 2.1 above) derived by Licensor from its sale of Licensed
Products in the Excluded Asian Countries. Licensor shall account and pay over to
Licensee, not less frequently than quarterly, Licensee's share of net profits
from the sale by Licensor of Licensed Products in the Excluded Asian Countries.
3.3. If within 12 months following the date hereof, Licensee
shall have declined or failed to (a) establish a dedicated business office and
personnel or (b) effect sales of Licensed Products in reasonable commercial
quantities in one or more countries of Europe, then Licensor shall have the
right, upon 90 days written notice to Licensee, to exclude any or all of the
countries of Europe from the Licensed Territory and to terminate Licensee's
right to
7
<PAGE> 32
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
manufacture, sell and distribute Licensed Products therein. In such event,
Licensee shall be entitled to share in * of the net profits (as calculated in
Section 2.1 above) derived by Licensor from its sale of Licensed Products in
Europe.
4. TERM.
[Note: For Licenses granted under Section 2.3 of the GTIS
Master Agreement, insert the following:
The license granted hereunder shall be effective on the date
hereof [which date, for Previously Developed Games, shall be
the earlier of the actual release date or 60 days after
delivery of the master disk to Licensee] and shall terminate on
the earlier of (a) three years from the date hereof, or (b)
upon termination of Licensor's rights obtained from third
parties, unless sooner terminated in accordance with the terms
and conditions hereof; provided, however, that (a) the license
term shall be deemed extended for an additional one year if
Licensee has paid royalties hereunder amounting to * or more in
excess of * of the amount of all Third Party Fees and Royalties
payable in respect of the exploitation of Licensed Products
during the third license year, and (b) the license term shall
be deemed further extended for a final additional one year if
Licensee has paid royalties hereunder amounting to * or more in
excess of * of the amount of all Third
8
<PAGE> 33
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Party Fees and Royalties payable in respect of the sale or
other exploitation of Licensed Products during the fourth
license year. For purposes hereof, royalties and Third Party
Fees and Royalties payable in respect of the sale or other
exploitation of Licensed Products during a license year shall
include amounts paid subsequent to the license year on account
of Licensed Products sold or otherwise exploited during such
license year, and shall not include amounts paid during a
license year on account of the sale or other exploitation of
Licensed Products during the prior license year. Licensee shall
be entitled, one time only, to make a voluntary payment to
Licensor in order to reach either (but not both) of the *
thresholds referred to above.]
[Note: For licenses granted under Section 2.4 of the GTIS
Master Agreement, insert the following:
The license granted hereunder shall be effective on the date
hereof and terminate on the termination of Licensor's rights
obtained from third parties, provided however, that at any time
prior to five years from the earlier of the actual release date
or 60 days after delivery of the master disk to Licensee,
Licensor may notify Licensee of its election to terminate the
license, effective on expiration of such five-year period, and
in such event Licensor
9
<PAGE> 34
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
shall pay to Licensee the portion of the development costs paid
by Licensee under Section 2.4 of the GTIS Master Agreement.]
[Note: For licenses granted under Section 2.5 of the GTIS
Master Agreement, insert the following:
The license granted hereunder shall be effective on the date
hereof and terminate on the termination of Licensor's rights
obtained from third parties.
5. CONSIDERATION.
Licensee shall pay Licensor, with respect to the sale
throughout the Territory of the Licensed Products, a royalty as specified in
Schedule "B" annexed hereto on each unit of Licensed Product sold.
6. ACCOUNTINGS.
6.1. Licensee agrees to forward to Licensor, within
forty-five (45) days after the end of each calendar quarter ("Royalty Period"),
commencing with the first calendar quarter during which any unit of the Licensed
Product is sold, a report of the number of units and average wholesale price (by
sales bracket, as provided in Schedule B hereof) of the Licensed Products sold
within such Royalty Period and the royalty amount due for the sale of such units
calculated in accordance with Section 6.3 below and any recoupment claimed in
accordance with Schedule B annexed hereto, and Section 3 of the GTIS Master
Agreement. Such report shall also include a cumulative reconciliation of the
number of units of Licensed Products produced by Licensee to the number of units
on hand. Licensee agrees that accompanying each such report shall be payment, in
U. S. funds, of the amounts due to Licensor, if any, in respect of
10
<PAGE> 35
such Royalty Period in excess of any permitted recoupment. Royalties calculated
in foreign currencies shall be converted to U. S. currency at the spot rate of
exchange published in the Wall Street Journal as of the last day of the Royalty
Period. Such reports shall be required to be submitted with respect to sales and
distributions of the Licensed Product whether or not any amounts are due under
the terms hereof.
6.2. Licensee agrees to keep accurate books of account and
records with respect to the Licensed Products, covering all sales, purchases and
inventories of Licensed Products and all royalty fees due under this Agreement
and to permit Licensor at its own expense to have accounting professionals
(which may include Licensor's employees who have accounting degrees) inspect
such books of account and records during reasonable business hours (but not
during the first three weeks of a calendar quarter), upon prior reasonable
written notice, for the sole purpose of verifying the reports to be provided
hereunder. Such inspections, together with inspections of Licensee's books of
account and records pertaining to other Computer Games licensed to Licensee by
Licensor or its affiliates under Other Home Computer Software Distribution and
License Agreements, shall occur no more frequently than twice during any twelve
(12) month period. Licensor's inspectors shall not be physically present in
Licensee's offices for more than 10 consecutive days in connection with any such
inspection, provided that Licensee shall have supplied all requested information
and documentation and responded to questions on a reasonably prompt basis.
Licensor shall keep any information obtained from any such inspections in
confidence and shall require that its accounting professionals do so as well.
Licensee's books relating to any particular royalty statement may be examined as
aforesaid only within two (2) years after the date rendered and Licensee shall
have no obligation to permit
11
<PAGE> 36
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Licensor to so examine such books relating to any particular royalty statement
more than once for any one statement, unless in connection with a civil action
filed by Licensor against Licensee in connection with such statement. In the
event that any audit by Licensor's accounting professionals reveals that
Licensee has underpaid Licensor by an aggregate of * or more with respect to the
specific royalty statements which are the subject of such audit, Licensee agrees
that it shall also reimburse Licensor for the reasonable documented costs for
any such audit up to the amount of the shortfall.
6.3. Royalties shall be paid on * of products sold by
Licensee's point of sale ("POS") customers, less actual returns. With respect to
shipments to non-POS customers, not less than * of the shipment shall be deemed
a sale for royalty purposes on the date of shipment. An additional * of the
shipment, less actual returns, shall be deemed a sale for royalty purposes six
(6) months following the date of shipment and the balance of *, less actual
returns, shall be deemed a sale for royalty purposes twelve (12) months
following the date of shipment. As used herein, point of sale customers mean
those customers who report actual sales by selection number to Licensee via
computer and scan their sales by UPC codes at cash registers.
6.4. Licensor shall permit Licensee, at Licensee's own
expense, to have an independent certified public accountant inspect Licensor's
books and records with respect to the payment by Licensor of Third Party Fees
and Royalties in connection with the Licensed Products, during reasonable hours,
upon prior reasonable written notice and subject to such confidentiality
requirements (including the execution of appropriate confidentiality agreements)
12
<PAGE> 37
as Licensor may require, for the sole purpose of verifying payment and
calculation by Licensor of such Third Party Fees and Royalties. Licensor's books
and records may be examined by Licensee's representatives not more frequently
than twice in any twelve-month period and Licensee shall otherwise have
substantially the same rights as provided to Licensor under Section 6.2 above.
6.5. In circumstances where either party is obligated under
this Agreement to account to the other party in respect of any entitlement to
the other party's share in net profits from the exploitation of the Licensed
Product, such party shall account substantially in the same manner and in the
same time frame as provided in this Paragraph 6 above. The party to which such
accounting is made shall also have substantially the same rights as provided to
Licensor in Section 6.2.
7. QUALITY OF LICENSED PRODUCT.
7.1. The Licensed Products as manufactured, advertised,
sold, distributed or otherwise disposed of by Licensee under this Agreement
shall be of a high quality and shall be sold and distributed in packaging
prescribed by Licensor bearing Licensor's trademarks and trade names. Such
packaging may indicate that the Licensed Products are distributed by Licensee.
Licensor shall have the right to determine in its reasonable discretion whether
the Licensed Product meets Licensor's high standards of merchantability.
Licensee agrees to furnish Licensor free of cost for Licensor's written approval
as to quality and style (which approval shall not be unreasonably withheld),
samples of the Licensed Product, together with its proposed advertising,
packaging and wrapping materials, before its manufacture, sale or distribution
(whichever first occurs) and the Licensed Product shall not be sold or
distributed
13
<PAGE> 38
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
by Licensee without such written approval.
7.2. If Licensor shall disapprove of any item submitted by
Licensee for approval hereunder, Licensor shall furnish at the time notice of
disapproval is given to Licensee an explanation of the reason(s) for such
disapproval and recommendations for suggested changes and Licensee shall
resubmit such item after changes have been made for Licensor's approval.
7.3. In the event that the quality of any Licensed Product
approved by Licensor shall become less than that approved by Licensor and
Licensee shall fail to raise the quality to the approved level within thirty
(30) days after received written notice from Licensor, the license granted under
this Agreement for such Licensed Product shall automatically terminate and shall
remain terminated until Licensor shall subsequently renew its approval of the
Licensed product.
7.4. If disapproval is not received by Licensee within five
(5) business days after Licensor's receipt of the item submitted for approval,
Licensor's approval shall be deemed to have been given. Subsequent to final
approval, Licensor may request the Licensee once each quarter to send a
reasonable number of production samples (but in any event not more than *)
without payment of any Third Party Fees and Royalties or other royalty hereunder
to Licensor to ensure quality control. Should Licensor require additional
samples for any reason other than resale or any other commercial exploitation by
Licensor, Licensee shall be required to sell such samples to Licensor at its
cost (but without payment of any Third Party Fees and Royalties or other royalty
hereunder), but not more than * units of each Licensed Product.
14
<PAGE> 39
8. TRADEMARK AND COPYRIGHT, ETC.
8.1. "Notice" as used in this Section shall mean the
following statutory copyright notice and notice of registration or application
for registration of the licensed trademark:
_ _ _ _ (TM) or (R)
All Rights Reserved
C _ _ _ _ Licensed from [Midway Manufacturing Company(R)]
[Williams(R) Electronics Games, Inc.]
[Williams(R) Entertainment Inc.]
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensor shall advise Licensee prior to use
whether (TM) or (R) shall follow the words " _ _ _ _ ."
8.2. Licensee shall furnish to Licensor samples of all
packaging in which the Licensed Products are sold by Licensee and Licensor shall
cause the copyright in the packaging to be registered with the U.S. Copyright
Office and recorded with the U.S. Customs Dept. at Licensor's expense. Licensee
shall print, stamp or mold the Notice on all Licensed Products and on the front
of each package or container used in connection therewith, and Licensee shall
print the Notice on each label, advertisement and promotional release concerning
any Licensed Products, all in accordance with instructions from Licensor,
providing, however, that such notice shall be imprinted on the back of the
package or container used in connection therewith, displayed on the title screen
of the Licensed Product, and in the instruction booklet, if any, packaged with
the Licensed Product. Licensee agrees to execute and deliver to Licensor in such
form as Licensor may reasonably request all instruments necessary to effectuate
trademark protection or to record Licensee as a registered user of any
trademarks or to cancel
15
<PAGE> 40
such registration and if Licensee fails to execute such instruments, Licensee
hereby appoints Licensor Licensee's attorney-in-fact to do so on Licensees
behalf. Licensee shall also furnish Licensor samples of all advertising or
promotional materials bearing the Notice for Licensor's approval.
8.3. Subject to the terms of this Agreement, Licensee
acknowledges and agrees that: All copyrights, trademarks and service marks and
rights to same referred to in this Section 8 in the name of and/or owned by
Licensor shall be and remain the sole and complete property of Licensor; that
all such copyrights, trademarks and service marks and rights to same in the name
of or owned by any copyright proprietor other than Licensor or Licensee shall be
and remain the sole and complete property of such copyright proprietor; that all
trademarks and service marks which, and/or the right to use which, arise out of
the license hereby granted to use the Licensed Property shall be and remain the
sole and complete property of Licensor; that Licensee shall not at any time
acquire or claim any right, title or interest of any nature whatsoever in any
such trademark or service mark by virtue of this Agreement or of Licensee's uses
thereof in connection with the Licensed Products; and that any right, title or
interest in or relating to any such trademark or service mark, which comes into
existence as a result of, or during the term of, the exercise by Licensee of any
right granted to it hereunder shall immediately vest in Licensor.
8.4. Licensee agrees to assist Licensor at Licensor's
expense to the extent necessary in the procurement of any protection or to
protect any of Licensor's right to the Licensed Property. Licensee shall notify
Licensor in writing of any infringements or imitations by others of the Licensed
Property on articles similar to those covered in this
16
<PAGE> 41
Agreement which may come to the Licensee's attention. Licensor shall have the
right to commence action to enforce its proprietary rights and prosecute any
such infringements, and Licensee agrees to fully cooperate, at Licensor's
expense, in any such action. However, Licensee shall not incur any such expense
reimbursable by Licensor without Licensor's express written approval and all
recoveries resulting from any such action shall belong solely to Licensor. In
the event Licensor declines to pursue any such action, Licensee may, with
Licensor's written permission, and subject to the consent of any third party
having rights in the Licensed Property, institute such an action, and Licensor,
at Licensee's expense, shall cooperate in such action instituted by Licensee and
all recoveries resulting from any such action shall belong solely to Licensee.
Licensor shall not unreasonably withhold or delay its permission to enable
Licensee to pursue an action (if Licensor shall decline to pursue such action)
against persons or entities reasonably believed by Licensee to be counterfeiting
or pirating Licensee's Licensed Products. Licensor shall not unreasonably
withhold or delay its permission to grant to any sublicensee who requires it, at
the time of entering into a sublicense, reasonable rights (without Licensor's
prior consent in each instance) to pursue persons reasonably believed to be
engaged in counterfeiting or piracy of the Licensee Product.
8.5. During the term of this Agreement and thereafter,
Licensee:
(a) will not challenge the ownership or rights of
Licensor in and to the Licensed Property or any copyright or trademark
pertaining thereto developed by or for Licensor, nor attack the validity of the
license granted hereunder or participate in any challenge thereto;
(b) will manufacture, sell and distribute the Licensed
Products
17
<PAGE> 42
in compliance with all applicable laws and governmental regulations in
accordance with the terms of this Agreement;
(c) will not except as set forth in this Agreement,
either directly or indirectly, use or display or authorize others to use or
display, the trademarks, copyrights or proprietary rights of Licensor in
connection with any advertising, assembly, manufacture, distribution, use, sale
or lease of any goods, other than in connection with the manufacture and sale of
the Licensed Products; and
(d) subject to Licensee's best business judgment
Licensee will exercise reasonable efforts to: (i) manufacture sufficient
quantities of the Licensed Product to meet the market demand for same; (ii)
conduct advertising activities to promote the sale of Licensed Product; and
(iii) make any and all arrangements necessary to accomplish such undertakings.
9. MATERIALS.
9.1. Notwithstanding anything contained herein to the
contrary and subject to the terms of this Agreement, all artwork, designs and
computer software embodying the Licensed Property, or any reproduction thereof,
which are designed, developed and/or created by Licensee hereunder (or any of
its sublicensees, affiliates or subsidiaries), shall be, and remain Licensor's
sole and exclusive property, inclusive of all copyrights and right to copyright
therein and thereto for the life of the copyright therein; provided that during
the term of this Agreement, Licensee shall have the exclusive right, license and
privilege (without any compensation to Licensor except as provided in Section 5)
to use all such above described materials in connection with its exploitation,
sale and distribution of the Licensed Products.
18
<PAGE> 43
9.2. Licensor shall make available to Licensee, at
Licensor's actual out of pocket cost, any artwork relating to the Licensed
Property which Licensor owns and which is reasonably available to Licensor for
Licensee's use in connection with the exploitation of the Licensed Property.
10. TRANSLATIONS.
In the event that Licensee shall reasonably require the
text associated with any Licensed Product to be translated into a language other
than English, Licensor shall, upon request, provide to Licensee the text files
and the text that appears in bit map files and printed copies of the script used
for audio components of the Licensed Product and Licensee shall furnish, at its
own expense, to Licensor a translation text thereof. Licensor shall then cause a
new Technically Acceptable Master Disk (as that term is defined in the GTIS
Master Agreement) containing such translation to be encoded, at Licensor's own
expense, and delivered to Licensee.
11. REPRESENTATIONS AND WARRANTIES.
11.1. Licensor hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered by Licensor; Licensor
has the full power and authority to enter into this Agreement and perform its
obligations hereunder; this Agreement constitutes the valid and binding
obligation of Licensor, enforceable in accordance with its terms; the making of
this Agreement does not violate any agreement, right or obligation existing
between Licensor and any other person, firm or corporation; and the Licensed
Property, if used pursuant to the license granted herein, will not infringe upon
or violate any rights of any third party.
11.2. Licensee hereby represents and warrants that this
Agreement has
19
<PAGE> 44
been duly authorized, executed and delivered by Licensee; Licensee has the full
power and authority to enter into and perform its obligations hereunder; this
Agreement constitutes the valid and binding obligation of Licensee, enforceable
in accordance with its terms; the making of this Agreement does not violate any
agreement, right or obligation existing between Licensee and any other person,
firm or corporation; and its manufacture, advertisement, distribution and sale
of the Licensed Products will be in accordance with the terms of this Agreement
so as not to infringe upon or violate any rights of any third party.
12. INDEMNIFICATION.
12.1. Each party agrees to indemnify and hold the other
(including officers, directors, agents and employees of such party or its
subsidiaries, affiliates and sublicensees) harmless against any loss, damage,
expense or cost (including reasonable attorneys' fees) arising out of any claim,
demand or suit or judgment resulting from any breach of any warranty or
representation set forth in Section 11 above. Each party shall promptly inform
the other of any such claim, demand, suit or judgment.
12.2. In connection with any such claim, demand or suit
referred to above, the party so indemnifying (the "Indemnitor") agrees to
defend, contest or otherwise protect the indemnified party (the "Indemnitee")
against any such suit, action, investigation, claim or proceeding at the
Indemnitor's own cost and expense. The Indemnitee shall have the right, but not
the obligation to participate, at its own expense, in the defense thereof by
counsel of its own choice. In the event that the Indemnitor fails timely to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding, the Indemnitee shall have the right to
defend, contest or otherwise protect against the same, and, upon ten (10) days'
20
<PAGE> 45
written notice to the Indemnitor, make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnitor, including without
limitation, reasonable attorneys' fees, disbursements and all reasonable amount
applied as a result of such suit, action, investigation, claim or proceeding or
compromise or settlement thereof. The obligations hereunder shall survive the
termination or expiration of this Agreement.
12.3. Neither Licensor nor Licensee shall be liable for any
incidental, consequential or punitive damages to the other.
13. EVENTS OF DEFAULT AND TERMINATION.
Licensee shall be deemed to be in default of this Agreement
in the event either of the following occurs:
(a) Licensee fails to make any payment or furnish any
statement in accordance herewith, provided that Licensee shall have been given a
first written notice of such default and a period of at least 15 days in which
to cure such default and, if such default shall not have been cured within such
period, Licensee shall have been given a second written notice of such default
and a further period of at least 10 days in which to cure such default; or
(b) Licensee fails after thirty (30) days' written
notice to Licensee to comply with any other of Licensee's obligations hereunder.
14. EXPIRATION OR TERMINATION OF AGREEMENT.
Upon expiration or termination of this Agreement, all
rights granted to Licensee herein shall forthwith revert to Licensor with the
following consequences:
(a) All unpaid royalties shall be due and payable in
accordance with Section 6.1 hereof.
21
<PAGE> 46
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
(b) Licensor shall thereafter be free to license others
to use the Licensed Property in connection with the manufacture, advertisement,
distribution and sale of items identical or similar to the Licensed Products in
the Territory.
(c) In the event of termination or expiration of this
Agreement, other than a termination by Licensor as a result of a material breach
of this Agreement by Licensee, Licensee may continue to sell for a period of one
hundred eighty (180) days after the effective date of termination all approved
copies of the units of the Licensed Product produced prior thereto.
Notwithstanding the expiration or termination of this
Agreement, Licensor will continue to account and pay over to Licensee, on a
periodic basis not less frequently than quarterly, * of the net profits (as
calculated in Section 2.1 above) derived by Licensor from the exploitation of
any ancillary merchandising rights to the Licensed Products (as provided in
Section 2.1 above) and * of the net profits derived by Licensor from the
exploitation of Licensed Products in the Excluded Asian Countries, as provided
in Section 3.2 above, or in Europe, to the extent provided in Section 3.3 above.
15. CONFIDENTIAL INFORMATION.
Each of the parties shall keep in confidence and not
disclose to any third party, without the written permission of the other party,
the terms of this Agreement and the proprietary information of the other party
made known to it under this Agreement, except that GTIS may make such
disclosures to General Atlantic Partners who have executed a confidentiality
agreement with GTIS. This requirement of confidentiality shall not apply to
22
<PAGE> 47
information that is (a) in the public domain through no wrongful act of the
disclosing party; (b) rightfully received by the disclosing party from a third
party who is not bound by a restriction of nondisclosure; (c) already in the
disclosing party's possession without restriction as to disclosure; or (d) is
required to be disclosed by applicable rules and regulations of government
agencies or judicial bodies. This obligation of confidentiality: (i) shall
survive termination of this Agreement and (ii) shall extend to any subcontractor
of either party and each party agrees to obtain from each such subcontractor a
written agreement to abide by the foregoing confidentiality requirements.
16. NOTICES.
Any notice, consent, approval, request, waiver or statement
to be given, made or provided for under this Agreement shall be in writing and
deemed to have been duly given (i) by its delivery personally or by express
mail; or (ii) five days after its being mailed, air express, registered or
certified, return receipt requested in a U.S. Post Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 951-3107
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 951-3052
Facsimile Number: (212) 679-6850
23
<PAGE> 48
TO LICENSOR: WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
WITH A COPY TO: Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 782-1964
or such other address as either party may designate by notice given as
aforesaid.
17. MISCELLANEOUS.
17.1. This Agreement is personal to Licensee and Licensor
and may not be assigned, in whole or in part, and none of Licensee's or
Licensor's rights or obligations hereunder may be delegated to any person or
party without the prior written consent of the other, except that any party may
assign its rights and obligations to any direct or indirect subsidiary or
affiliate of the assigning party or to any person, firm or corporation owning or
acquiring all or substantially all of the stock or assets of the assigning
party, so long as the assigning party remains liable for its obligations
hereunder.
17.2. The entire understanding between the parties hereto
relating to the subject matter hereof is contained herein. This Agreement cannot
be changed, modified, amended or terminated except by an instrument in writing
executed by the parties hereto.
17.3. 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
24
<PAGE> 49
to therein and no waiver shall be deemed or construed to be a waiver of such
terms or conditions for the future or any subsequent breach thereof.
17.4. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between Licensor and
Licensee, and neither Licensor nor Licensee 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.
17.5. This Agreement shall be governed by the laws of the
State of Illinois applicable to contracts made and to be wholly performed in the
State of Illinois.
17.6. 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, either such provision will be deemed amended to
conform to such laws or regulations without materially altering the intention of
the parties or it shall be stricken and the remainder of this Agreement shall
remain in full force and effect.
17.7. This Agreement may be executed in counterparts each
of which shall be deemed an original and when taken together shall be deemed one
and the same document.
25
<PAGE> 50
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
[WILLIAMS ELECTRONICS GAMES, INC.]
By:
------------------------------
[MIDWAY MANUFACTURING COMPANY]
By:
------------------------------
[WILLIAMS ENTERTAINMENT INC.]
By:
------------------------------
GT INTERACTIVE SOFTWARE CORP.
By:
------------------------------
26
<PAGE> 51
SCHEDULE A
[Insert description of Licensed Property]
27
<PAGE> 52
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
SCHEDULE B
ROYALTIES
Licensee shall pay royalties in an amount equal to the
following percentages of the net wholesale sales price of a Unit sold and not
returned:
Net Wholesale Sales Price Royalty %
------------------------- ---------
* or greater *
* *
* *
* *
* *
* *
* *
At Net Wholesale Sales Prices between * and * the above percentages shall be
prorated. For example, at a Net Wholesale Sales Price of *, the royalty
percentage shall be *. Notwithstanding the above, if the Licensed Products other
than previously Developed Games cost * or more to develop or acquire ("Premium
Products"), the minimum per unit royalty for such Premium Products shall be
calculated as follows: (a) for Premium Products which are First Released (as
such term is defined in the GTIS Master Agreement) before April 1, 1996, the
minimum per unit royalty shall be * until March 31, 1996, provided, however,
that if less than six (6) months have expired since the date on which the
Premium Product was First Released, then during the period commencing on April
1, 1996 and ending upon the expiration of six months from the date on which such
Premium Product was First Released, the minimum per unit royalty shall be an
amount equal to * of the product of (1) the Net Wholesale Sales Price of such
Premium Product as of April 1, 1996 multiplied by (2) the royalty percentage
which corresponds to such Net Wholesale Sales Price on the table set forth
above; (prorated as appropriate) and (b) for Premium Products which are First
Released on or after April 1, 1996, the minimum per unit royalty during the
six-month period commencing on the date on which the Premium Product was First
Released shall be an amount equal to * of the product of (1) the Net Wholesale
Sales Price of such Premium Product as of April 1, 1996 multiplied by (2) the
royalty percentage which
28
<PAGE> 53
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
corresponds to such Net Wholesale Sales Price on the table set forth above
(prorated as appropriate). After March 31, 1996, or the expiration of the
six-month period referred to in (a) above, in the case of Premium Products which
are First Released prior to April 1, 1996, and at the expiration of the
six-month period referred to in (b) above, in the case of Premium Products First
Released after March 31, 1996, there shall be no further minimum per unit
royalty. The foregoing minimum per unit royalty provision shall not apply to
so-called "hint books" as to which there shall be no minimum royalty.
"Net Wholesale Sales Price" shall be that price invoiced by Licensee to its
customers, less any price discounts, rebates or credits granted at the time of
sale and taxes invoiced to customers (including VAT). No deduction shall be made
for bad debts or other uncollected amounts, advertising allowances, including
cooperative advertising, or any other costs incurred in manufacturing, selling
or distributing the Licensed Products. In the event that Licensee's experience
with respect to bad debts and uncollectible amounts during any calendar year in
respect of sales of Licensed Products under this Agreement and all other Home
Computer Software Distribution and License Agreements entered into between
Licensor and its affiliates and Licensee under the GTIS Master Agreement, shall
exceed * of Licensee's aggregate net sales of Licensed Products under this
Agreement and all such Other Home Computer Software Distribution and License
Agreements during such calendar year ("Excess Bad Debts"), then Licensee shall
be entitled to receive a credit against royalties payable under this Agreement
or any Other Home Computer Software Distribution and License Agreement
determined as follows: the average of the weighted Net Wholesale Sales Prices of
all Licensed Products sold under this Agreement and all Other Home Computer
Software Distribution and License Agreements during such calendar year shall be
determined, and the royalty percentage which corresponds thereto in the table
above (prorated as appropriate) shall be multiplied by the amount of Excess Bad
Debts for such calendar year to determine the amount of such credit.
Royalties for "direct response sales" shall be calculated by multiplying * of
the royalty percentages set forth above (prorated as appropriate) times
Licensor's net receipts from such sales and, for purposes of determining the
applicable royalty percentages in the table set forth above, the amount of such
net receipts shall be substituted for "Net Wholesale Sales Price." The minimum
per unit royalty shall be * of the minimum per unit royalty applicable to sales
other than "direct response sales." Direct response sales shall refer to sales
made directly to consumers other than from a fixed retail location and shall
include catalogue sales, direct mail, print and television sales. Licensee's net
receipts from direct response sales shall be based upon actual monies received,
less amounts separately paid by purchasers as sales taxes and shipping and
handling charges.
ADJUSTMENTS TO ROYALTIES
29
<PAGE> 54
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Anything above to the contrary notwithstanding:
1. If Licensor is obligated to pay any Third Party Fees and Royalties
with respect to the sale of Licensed Products, the per unit royalties to be paid
by Licensee to Licensor with respect to such Licensed Products shall be equal to
* of all such Third Party Fees and Royalties, plus the greater of (a) the
royalty otherwise payable to Licensor as provided above and (b) the other * of
such Third Party Fees and Royalties. In no event shall the per unit royalty on
the sale of Licensed Products be less than * of such Third Party Fees and
Royalties.
2. In cases where Licensed Products are sold by sublicensees under
sublicenses granted by Licensee in accordance with the provisions of Section 2.1
above, royalties shall be payable by Licensee to Licensor hereunder equal to the
sum of (a) an amount equal to all Third Party Fees and Royalties payable with
respect to the sale of such Licensed Products, plus (b) * of the net proceeds
received by Licensee from such sublicensee after deducting (i) a fee to Licensee
equal to * of such net proceeds, (ii) an amount equal to all Third Party Fees
and Royalties, and, (iii) in the case of sublicensees to whom Licensee supplies
the Licensed Product, Licensee's direct manufacturing and shipping costs. In no
event shall the royalty be less than such Third Party Fees and Royalties.
3. Until Licensee shall have fully recouped the * Option and Advance
Fee, as provided below, Licensor shall pay over to Licensee Licensor's share of
net profits from the exploitation of the Licensed Product in the Excluded Asian
Countries and in any other territories in which Licensor is entitled to exploit
the Licensed Products or ancillary merchandising rights thereto under this
Agreement, and all amounts so paid over to Licensee shall be deemed to
constitute additional Recoupable Amounts (as that term is used below) under this
Agreement.
RECOUPMENT.
Licensee shall be entitled to apply the aggregate amount by which (a) royalties
paid under this Agreement exceed (b) * of the amount of any Third Party Fees and
Royalties payable by Licensor to parties having rights with respect to the sale
of Licensed Products (the "Recoupable Amount") to recoup the * Option and
Advance Fee paid by Licensee to WMS Industries Inc. pursuant to Section 3 of the
GTIS Master Agreement, until such Recoupable Amount together with Recoupable
Amounts under any other Home Computer Software Distribution and License
Agreement entered into by Licensee pursuant to the GTIS Master Agreement ("Other
Home Software Distribution and License Agreements") equal *; provided, however,
that (a) to the extent that the aggregate of all Recoupable Amounts under this
Agreement and the Other Home Computer Software Distribution and License
Agreements between December 28, 1994 and December 28, 1995 exceeds the
installment of the Option and Advance Fee paid on December 28, 1994 such excess
shall be paid to Licensor and the licensors under the Other Home Software
Distribution and License Agreements, in accordance with their respective
interests, and applied
30
<PAGE> 55
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
in reduction of the installment of the Option and Advance Fee payable under the
GTIS Master Agreement on December 28, 1996, up to a maximum reduction of *, and
the balance of such excess, if any, shall be applied first in reduction of the
installment of the Option and Advance Fee payable on December 28, 1995, and then
in reduction of the installment of the Option and Advance Fee payable on
December 28, 1996, and (b) to the extent that the aggregate of all Recoupable
Amounts under this Agreement and all Other Home Computer Software Distribution
and License Agreements between December 28, 1994 and December 28, 1996 exceeds
the unrecouped portion of the installment of the Option and Advance Fee paid on
December 28, 1994 and December 28, 1995, the excess shall be paid to Licensor
and the licensors under the Other Home Software Distribution and License
Agreements, in accordance with their respective interests, and applied in
reduction of the installment of the Option and Advance Fee payable on December
28, 1996.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
Licensee shall be permitted to distribute free and promotional goods without the
payment of any Third Party Fees and Royalties or other royalties thereon,
subject to the provisions of Section 1 above and within the following
territorial and quantity limits:
United States and Canada: * units in the aggregate
United Kingdom,
Germany, Scandanavia,
Benelux, Italy, Spain,
Australia, and Japan): * units per country
Other Countries: * units per country
No royalties shall be payable by Licensee to Licensor in excess of any Third
Party Fees and Royalties in connection with the sale by Licensee of
"close-outs." For purposes hereof, "close-outs" shall mean any Licensed Products
that are sold for a price no greater than the sum of direct manufacturing and
shipping costs plus any Third Party Fees and Royalties.
31
<PAGE> 56
EXHIBIT B
Forms of Warrant and Registration Rights Agreement
<PAGE> 57
NEITHER THE WARRANTS REPRESENTED BY THIS
WARRANT CERTIFICATE NOR ANY SHARES
ACQUIRED UPON THE EXERCISE OF SUCH
WARRANTS HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR
ANY OTHER SECURITIES LAWS, NOR MAY SUCH
WARRANTS OR SHARES BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT OR OTHER LAWS.
THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN THIS WARRANT.
AS USED HEREIN, THE TERM "COMMON STOCK" SHALL MEAN THE
CLASS OF COMMON STOCK ISSUED AND SOLD BY THE COMPANY
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, IN AN INITIAL
PUBLIC OFFERING.
GT INTERACTIVE SOFTWARE CORP.
Common Stock Purchase Warrant
No. _____ _________ Warrants
NOT EXERCISABLE AFTER THE DATES SPECIFIED HEREIN
THIS WARRANT CERTIFICATE CERTIFIES THAT WMS Industries Inc.,
or registered assigns, is the registered holder of the number of warrants set
forth above, each of which entitles such holder hereof, subject to the terms,
provisions and conditions set forth herein, to purchase from the Company at any
time prior to [5 years from issue] at the principal office of the Company or
such other location designated by the Company in accordance with the terms set
forth herein, one fully paid and nonassessable share of the Common Stock of the
Company, no par value per share ("Common Stock"), at the initial purchase price
of $_________ per share [IPO Price], upon presentation and surrender of this
Warrant Certificate with the Form of Election to Purchase on the reverse side
hereof duly executed and payment in full (in cash or by certified or official
bank or bank cashier's check payable to the order of the Company) of the
applicable Purchase Price as to which the Warrant(s) represented by the Warrant
Certificate are exercised, all subject to the terms, provisions and conditions
hereof; provided, however, that the holder hereof shall have the right, at its
election, in lieu of paying the Purchase Price in cash or by certified or
official bank or bank cashier's check as described
<PAGE> 58
above, to instruct the Company, in the Form of Election to Purchase, to retain,
in payment of the Purchase Price, a number of shares of Common Stock (the
"Payment Shares") equal to the quotient obtained by dividing (x) the aggregate
Purchase Price of the shares as to which the Warrants represented by this
Certificate are being exercised by (y) the current market price per share (as
defined in Section 8(d) below), and to deduct the number of Payment Shares from
the shares to be delivered to the holder hereof. The number of Warrants
evidenced by this Warrant Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are as of _________ __, 199_. The Warrants represented by
this Certificate are being issued pursuant to the terms of the GTIS Master
Option and License Agreement, dated December __, 1994, by and between WMS
Industries Inc. and the Company.
The rights of the holder of this Warrant shall be subject to
the following further terms and conditions:
SECTION I. Exercise of Warrants; Purchase Price.
(1) Subject to the provisions of Section 6(d) hereof, the
registered holder of this Warrant Certificate may exercise the Warrants
evidenced hereby, in whole or in part, as follows: (i)___ Warrants exercisable
for ____ shares of Common Stock (1/3 of total shares represented by Warrant) may
be exercised on or after (x) March 31, 1996 or (y)______ __, 199_ (6 months
after the date of the IPO), whichever is later; (ii) ___ Warrants exercisable
for ___ shares of Common Stock (1/3 of total shares represented by Warrant) may
be exercised on or after (x) March 31, 1997 or (y)_______ __, 199_ (6 months
after the date of the IPO), whichever is later; and (iii) ___ Warrants
exercisable for __ shares of Common Stock (1/3 of total shares represented by
Warrant) may be exercised on or after (x) March 31, 1998 or (y) _________ __,
199_ (6 months after the date of the IPO), whichever is later. The Warrants
referred to in (a)(i) above are exercisable until 4:00 p.m., New York City time,
on [five years from the date such Warrants become exercisable]; the Warrants
referred to in (a)(ii) above are exercisable until 4:00 p.m., New York City
time, on [five years from the date such Warrants become exercisable]; and the
Warrants referred to in (a)(iii) above are exercisable until 4:00 p.m., New York
City time, on [five years from the date such Warrants become exercisable] (each
a "Final Expiration Date"), upon surrender of this Warrant Certificate, with the
Form of Election to Purchase on the reverse side hereof duly executed, to the
Company at its office maintained pursuant to Section 2(b) hereof, together with
payment of the Purchase Price for each share of Common Stock as to which the
Warrants are exercised. Each warrant not exercised prior to 4:00 p.m., New York
City time, on the applicable Final Expiration Date shall become void and all
rights thereunder shall cease as of such time.
(2) The purchase price for each share of Common Stock pursuant
to the exercise of a Warrant shall be $_______ [IPO Price] (the "Purchase
Price"); provided, however, that the Purchase Price shall be subject to
adjustment from time to time as provided in Section 8 hereof. The aggregate
Purchase Price shall be payable in cash or by certified or official bank
<PAGE> 59
or bank cashier's check payable to the order of the Company, or by any other
means consented to by the Company.
(3) Upon receipt of this Warrant Certificate representing
exercisable Warrants, with the Form of Election to Purchase duly executed,
accompanied by payment of the aggregate Purchase Price for the shares to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder of this Warrant Certificate in accordance with Section 6 hereof,
the Company shall thereupon promptly (i) cause to be issued to the holder hereof
the Common Stock certificates for the number of whole shares of Common Stock to
be purchased and (ii) when appropriate, pay to the registered holder hereof, in
lieu of the issuance of fractional shares to which such holder would otherwise
be entitled, an amount in cash in accordance with Section 11 hereof.
(4) If the registered holder of this Warrant Certificate shall
exercise less than all the Warrants evidenced hereby, a new Warrant Certificate
evidencing Warrants equivalent to the Warrants remaining unexercised shall be
issued by the Company to the registered holder of this Warrant Certificate or to
his duly authorized assigns, subject to the provisions of Section 11 hereof.
SECTION II. Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
(1) Subject to the provisions of Section 11 hereof, at or
prior to the Final Expiration Date this Warrant Certificate, with or without
other Warrant Certificates, may be split up, combined or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock as the Warrant Certificate or
Warrant Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to split up, combine or exchange this Warrant
Certificate shall make such request in writing delivered to the Company, and
shall surrender the Warrant Certificate or Warrant Certificates to be split up,
combined or exchanged at the office of the Company maintained for such purpose
as set forth below. Thereupon the Company shall sign and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
split-up, combination or exchange of Warrant Certificates.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of a Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificate if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor to the registered owner in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
- 4 -
<PAGE> 60
(2) The Company will maintain an office (which may be an
agency maintained at a bank) in the City of New York in the State of New York
where notices, presentations and demands in respect of any Warrants may be made
upon it and where it will maintain the Warrant register upon which transfers and
exchanges of Warrants shall be recorded. Such office shall be maintained at GT
Interactive Software Corp., 16 East 40th Street, New York, New York 10016, until
such time as the Company shall notify the holders of the Warrants of any change
of location of such office.
SECTION III. Subsequent Issue of Warrant Certificates.
Subsequent to their original issuance, no Warrant Certificates shall be issued
except (a) Warrant Certificates issued upon any transfer, combination, split-up
or exchange of Warrants pursuant to the terms, conditions and provisions hereof,
(b) Warrant Certificates issued in replacement of mutilated, destroyed, lost or
stolen Warrant Certificates pursuant to Section 2 hereof, (c) Warrant
Certificates issued pursuant to Section 1(d) hereof upon the partial exercise of
any Warrant Certificate to evidence the unexercised portion of such Warrant
Certificate, (d) Warrant Certificates issued pursuant to Section 8(i) hereof and
(e) Warrant Certificates issued pursuant to Section 14 hereof.
SECTION IV. Cancellation and Destruction of Warrant
Certificates. All Warrant Certificates surrendered for the purpose of exercise,
exchange, substitution, transfer, split-up or combination shall be cancelled by
the Company, and no Warrant Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Warrant Certificate. The
Company shall cancel and retire any other Warrant Certificates purchased or
acquired by the Company otherwise than upon the exercise thereof.
SECTION V. Ownership; Restrictions on Transfer; Registration
of Transfers.
(1) Except as otherwise permitted by this Section 5, each
Warrant Certificate (including each Warrant Certificate issued upon the transfer
of such Warrant Certificate) shall be stamped or otherwise imprinted with
legends in substantially the following form:
"Neither the Warrants represented by
this Warrant Certificate nor any shares
acquired upon the exercise of such
Warrants have been registered under the
Securities Act of 1933, as amended or
any other securities laws nor may such
Warrants or shares be transferred, sold
or otherwise disposed of in the absence
of such registration or an exemption
therefrom under such act or other laws.
This Warrant and such shares may be
transferred only in compliance with the
conditions specified in this Warrant.
- 5 -
<PAGE> 61
(2) Except as otherwise permitted by this Section 5, each
certificate for Common Stock (or other securities) issued upon the exercise of
this Warrant, and each certificate issued upon the transfer of any such Common
Stock (or other securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The shares represented by this
certificate have not been registered
under the Securities Act of 1933, as
amended or any other securities laws and
may not be transferred, sold or
otherwise disposed of in the absence of
such registration or an exemption
therefrom under such Act or other laws.
Such shares may be transferred, sold or
otherwise disposed of only in compliance
with the conditions specified in the
Common Stock Purchase Warrants issued by
GT Interactive Software Corp. A complete
and correct copy of the form of such
Warrant is available for inspection at
the principal office of GT Interactive
Software Corp. or at the office or
agency maintained by GT Interactive
Software Corp. as provided in such
Warrants and will be furnished to the
holder of such shares upon written
request and without charge."
(3) Prior to any transfer of any Warrant Certificate that is
not registered under an effective registration statement under the Securities
Act of 1933 (the "Securities Act"), the holder thereof will give written notice
to the Company of such holder's intention to effect such transfer and to comply
in all other respects with this Section 5. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail to enable
counsel to render the opinion referred to below
If, in the opinion of counsel for the Company, the proposed
transfer may not be legally effected without registration of such Warrants under
the Securities Act, the Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer such Warrant until
either (x) receipt by the Company of a further notice from such holder pursuant
to the foregoing provisions of this Section 5 and fulfillment of the provisions
of this Section 5 or (y) such Warrants have been effectively registered under
the Securities Act.
If, in the opinion of counsel for the Company, the proposed
transfer may be effected without registration of such Warrants under the
Securities Act, such holder shall thereupon be entitled to transfer such
securities in accordance with the terms of the notice delivered by such holder
to the Company. Each Warrant Certificate issued upon or in connection with such
transfer shall bear the restrictive legends required by this Section 5, unless
in the opinion of such counsel, such restrictive legends are not required or
advisable.
(4) The restrictions imposed by this Section 5 upon the
transferability of the Warrants relating to the registration of securities under
the Securities Act set forth in clauses (b)
- 6 -
<PAGE> 62
and (c) of this Section 5 shall terminate as to any particular Warrants, (x)
when such securities shall have been effectively registered and sold or
distributed under the Securities Act, (y) when, in the opinion of both counsel
for the Company and the holder (each of whom shall be experienced in securities
law matters), any restrictions cease or are permitted to terminate under
applicable securities law, or (z) when, in the opinion of counsel for the
Company (who shall be experienced in securities law matters), such restrictions
are no longer required in order to insure compliance with the Securities Act or
any other applicable securities law, whichever is earliest. Whenever any such
restrictions shall cease and terminate as to any Warrants, the holder thereof
shall be entitled to receive from the Company, without expense (other than
applicable transfer taxes, if any), new Warrants of like tenor not bearing the
applicable legends previously required by this Section 5.
SECTION VI. Reservation and Availability of Shares of Common
Stock.
(1) The Company will cause to be reserved and kept available
out of its authorized and unissued shares of Common Stock or its authorized and
issued shares of Common Stock held in its treasury, the number of shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants. The transfer agent for the Common Stock, if any, will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Warrant on file with each transfer agent. The Company will furnish
the transfer agent a copy of all notices of adjustments and certificates related
thereto, transmitted to each holder of a Warrant Certificate pursuant to Section
8 hereof.
(2) So long as the Common Stock issuable upon the exercise of
Warrants may be listed on any national securities exchange or the NASDAQ Stock
Market, the Company shall use its best efforts to cause all shares reserved for
such issuance to be listed as expeditiously as possible on such exchange upon
official notice of issuance upon such exercise.
(3) The Company will take all such action as may be necessary
to ensure that all shares of Common Stock delivered upon exercise of Warrants
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(4) The Company will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the initial issuance or delivery of this Warrant Certificate or of the issuance
and delivery of any shares of Common Stock upon the exercise of Warrants, except
as set forth in the immediately following sentence. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer or delivery of this Warrant Certificate to a person other than, or the
issuance or delivery of certificates for Common Stock in a name other than that
of, the registered holder of the Warrant Certificate evidencing Warrants
surrendered for exercise or to issue or deliver any certificates for shares of
Common Stock upon the exercise of any Warrants until any such tax
- 7 -
<PAGE> 63
shall have been paid (any such tax being payable by the holder of such Warrant
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
SECTION VII. Common Stock Record Date. Each person in whose
name any certificate for shares of Common Stock is issued upon the exercise of
Warrants shall for all purposes be deemed to have become the holder of record of
the Common Stock represented thereby on, and such certificate shall be dated,
the close of business on the date upon which the Warrant Certificate evidencing
such Warrants was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the opening of
business on the next succeeding business day on which the Common Stock transfer
books of the Company are open.
SECTION VIII. Adjustment of Purchase Price, Number of Shares
or Number of Warrants. The Purchase Price, the number of shares of Common Stock
covered by each Warrant and the number of Warrants outstanding are subject to
adjustment from time to time as provided in this Section 8.
(1) In case the Company shall at any time after the
date hereof, (i) effect a distribution to all holders of its
outstanding Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares of
Common Stock or (iv) issue any securities of the Company in a
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving
corporation other than a consolidation or merger in respect of
which an adjustment is made pursuant to Section 10 hereof),
the number and kind of securities issuable commencing on the
record date for such distribution or the effective date of
such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any Warrant
exercised after such time shall be entitled to receive upon
exercise of the Warrant the aggregate number and kind of
securities which, if such Warrant had been exercised
immediately prior to such date and at a time when the Common
Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by
virtue of such distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. Notwithstanding
the foregoing, if a warrant is exercised subsequent to the
record date, if any, but prior to the relevant distribution
date or payment date, the Company shall not be required to
make any such payment or distribution pursuant to this
subsection (a) to the holder of such
- 8 -
<PAGE> 64
warrant prior to such payment or distribution date, but shall
make such payment or distribution on such date.
(2) In case the Company shall fix a record date for
making a distribution to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or
purchase Common Stock at a price per share of Common Stock
less than the then current market price per share (as defined
in Section 8(d) hereof) of Common Stock on such record date,
the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of
shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so to be offered
for subscription or purchase would purchase at the current
market price per share and the denominator of which shall be
the number of shares of Common Stock outstanding on such
record date plus the maximum number of additional shares of
Common Stock to be offered for subscription or purchase.
In the case of a distribution by the Company to all
holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase securities
convertible into, exchangeable for or carrying a right to
purchase Common Stock (such securities being referred to
herein as "Convertible Securities"), for purposes of this
Section 8(b), (i) such distribution shall be deemed to be a
distribution of rights, options or warrants to such holders
entitling them to subscribe for or purchase Common Stock at
the price per share for which Common Stock is issuable upon
conversion, exchange or exercise of such Convertible
Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such
rights, options or warrants, plus the minimum aggregate amount
of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion, exchange
or exercise thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the conversion, exchange or
exercise of such Convertible Securities issuable upon the
exercise of such rights, options or warrants), and (ii) the
total maximum number of shares of Common Stock issuable upon
conversion, exchange or exercise of such Convertible
Securities shall be deemed to be the number of shares of
Common Stock offered for subscription or purchase. In case
such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of
such consideration shall be as determined in good faith by the
Board of Directors of the Company. Shares of Common Stock
owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a
record
- 9 -
<PAGE> 65
date is fixed; and in the event that such rights, warrants or
options are not so issued, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed. Upon the
expiration of such rights, options or warrants, or to the
extent any Convertible Securities issued upon the exercise of
such rights, options or warrants are redeemed by the Company,
or otherwise cease to be convertible into, to be exchangeable
for or to carry any such right to purchase, shares of Common
Stock, the adjustment to the Purchase Price which was made
upon the issuance of such rights, options or warrants and any
subsequent adjustments based thereon, shall be recomputed to
reflect the issuance of only the number of rights, options or
warrants to subscribe for or purchase only the number of
shares of Common Stock as to which such rights, options or
warrants were actually exercised and the number of such shares
which were actually issued upon conversion, exchange or
exercise of such Convertible Securities.
(3) In case the Company shall fix a record date for
the making of a distribution to all holders of Common Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
or surviving corporation other than a consolidation or merger
in respect of which an adjustment is made pursuant to Section
10 hereof) of evidences of indebtedness or assets (other than
cash dividends payable out of consolidated earnings for the
Company's then current or immediately preceding fiscal year,
dividends payable in Common Stock and distributions which
result in an adjustment under Section 8(a) hereof) or rights,
options or warrants (excluding rights, options or warrants the
issuance of which results in an adjustment under Section 8(a)
or 8(b) hereof), the Purchase Price in effect after such
record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such date by a fraction,
the numerator of which shall be the then current market price
per share (as defined in Section 8(d) hereof) of Common Stock
on such date, less the fair market value (as determined in
good faith by the Board of Directors of the Company) of the
portion of assets, evidences of indebtedness or such rights,
options or warrants so to be distributed or paid applicable to
one share of Common Stock (or applicable to one share of
Common Stock) and the denominator of which shall be such
current market price per share of Common Stock. Such
adjustments shall be made successively whenever such a record
date is fixed or such an event occurs; and in the event that a
distribution of the kind described above is not so made, the
Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if the record date for
such distribution had not been fixed. Upon the expiration of
such rights, options or warrants, the adjustment to the
Purchase Price which was made upon the issuance of such
rights, options or warrants and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of
only the number of rights, options or warrants which were
actually exercised.
- 10 -
<PAGE> 66
(4) For the purpose of any computation required in
accordance with this Section 8, the "current market price per
share" of any security, including the Common Stock (a
"Security" for the purpose of this Section 8(d)), on any date
shall be deemed to be the average of the daily closing prices
(as such term is hereinafter defined) per share of such
Security for the 20 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current market price per
share of the Security is determined during a period following
the announcement by the issuer of such Security of (i) a
dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or
(ii) any subdivision, combination or reclassification of such
Security and prior to the expiration of 30 consecutive Trading
Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case,
the current market price per share shall be appropriately
adjusted to reflect the current market price per share
equivalent of such Security. The "closing price" for each day
shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in
the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New
York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Security is listed
or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, as
reported by the NASDAQ Stock Market's National Market, or if
not so listed, the average of the high bid and low asked
prices in the over-the-counter market, as reported in the Wall
Street Journal, or, if on any such date the Security is not
quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market
maker making a market in the Security selected by the Board of
Directors of the Company. If the Security is not publicly held
or so listed or traded, "current market price per share" shall
mean the fair value of the Security as determined in good
faith by the Board of Directors of the Company, whose
determination shall be conclusive. The term "Trading Day"
shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national
securities exchange, a Business Day. The term "Business Day"
shall mean any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
- 11 -
<PAGE> 67
(5) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this Section 8(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(6) In the event that at any time, as a result of an
adjustment made pursuant to Section 8(a) hereof, the holder of
any Warrant thereafter exercised shall become entitled to
receive any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities
so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in Section
8(a) through (c) hereof, inclusive, and the provisions of
Sections 1, 6, 7, 10 and 15 hereof with respect to the shares
of Common Stock shall apply on like terms to any such other
securities.
(7) Unless the Company shall have exercised its
election as provided in Section 8(i) hereof, upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 8(b) or (c) hereof, each Warrant
outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest hundredth) obtained by (i)
multiplying (x) the number of shares covered by a Warrant
immediately prior to this adjustment of the number of shares
by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product
so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
(8) Upon each adjustment of the number of shares of
Common Stock for which the Warrants are exercisable as
provided in Section 8(a) hereof, the Purchase Price payable
upon exercise of a Warrant shall be adjusted by multiplying
such Purchase Price immediately prior to such adjustment by a
fraction (i) the numerator of which shall be the number of
shares of Common Stock for which a Warrant was exercisable
prior to such adjustment and (ii) the denominator of which
shall be the number of shares of Common Stock for which a
Warrant is exercisable immediately thereafter.
(9) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of
Warrants, in substitution for any adjustment in the number of
shares of Common Stock purchasable upon the exercise of a
Warrant. Each Warrant outstanding after such adjustment of the
- 12 -
<PAGE> 68
number of Warrants shall be exercisable for the same number of
shares of Common Stock for which such Warrant was exercisable
prior to such adjustment. Each Warrant held of record prior to
such adjustment of the number of Warrants shall become that
number of Warrants (calculated to the nearest hundredth)
obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase
Price in effect after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Warrants, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter,
but shall be at least ten days later than the date of the
public announcement. Upon each adjustment of the number of
Warrants pursuant to this Section 8(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of
record of Warrant Certificates on such record date Warrant
Certificates evidencing, subject to Section 11, the additional
Warrants to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Warrant Certificates held
by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Warrant
Certificates evidencing all the Warrants to which such holders
shall be entitled after such adjustment. Warrant Certificates
so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Warrant
Certificates on the record date specified in the public
announcement.
(10) Irrespective of any adjustment or change in the
Purchase Price or the number of shares of Common Stock
issuable upon the exercise of the Warrants, the Warrant
Certificates may continue to express the Purchase Price per
share and the number of shares which were expressed upon the
initial Warrant Certificates issued hereunder.
(11) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par
value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully
paid and nonassessable shares of such Common Stock at such
adjusted Purchase Price.
(12) Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments required by this Section 8, as it in its sole
discretion shall determine to be advisable in order that any
consolidation or subdivision of the Common Stock, issuance
wholly for cash of any Common Stock at less than
- 13 -
<PAGE> 69
the current market price, issuance wholly for cash of Common
Stock or securities which by their terms are convertible into
or exchangeable for Common Stock, dividends on Common Stock
payable in Common Stock or issuance of rights, options or
warrants referred to in this Section 8, hereafter made by the
Company to its common stockholders, shall not be taxable to
them.
SECTION IX. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 8 hereof (other
than situations in which no adjustment is required pursuant to Section 8(e)),
the Company shall (a) promptly obtain a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company (who may be the regular auditors of the Company) setting forth the
Purchase Price as so adjusted, the number of shares of Common Stock issuable
upon the exercise of each Warrant as so adjusted and a brief statement of the
facts accounting for such adjustment, and (b) mail a brief summary thereof to
each holder of a Warrant Certificate in accordance with Section 16 hereof. The
Company will keep copies of such certificate at its office maintained pursuant
to Section 2(b) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant.
SECTION X. Consolidation, Merger or Sale of Assets. If the
Company shall at any time consolidate with or merge with and into another
corporation or shall sell or transfer to another entity all or substantially all
of the property of the Company, the holder of any Warrant will thereafter have
the right to receive, upon the exercise thereof in accordance with and subject
to the terms of this Warrant, the securities, cash and other property to which
the holder of the number of shares of Common Stock purchasable (at the time of
such consolidation, merger, sale or transfer) upon the exercise of such Warrant
would have been entitled upon such consolidation, merger, sale or transfer, if
any. The Company shall take such steps in connection with such consolidation,
merger, sale or transfer, as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be, in
relation to any securities or property (including cash) thereafter deliverable
upon the exercise of the Warrants. The Company, the successor corporation or the
purchasing entity, as the case may be, shall execute and deliver to the Company
an agreement so providing. The provisions of this Section 10 shall similarly
apply to successive mergers or consolidations or sales or other transfers.
SECTION XI. Fractional Warrants and Fractional Shares.
(1) The Company shall not be required to issue fractions of
Warrants or to distribute Warrant Certificates which evidence fractional
Warrants. Subject to Section 11(c) hereof, in lieu of such fractional Warrants,
there shall be paid to each registered holder of a Warrant Certificate with
regard to which a fractional Warrant would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Warrant.
For the purposes of this Section 11(a), the current market value of a whole
Warrant shall be the closing price of the Warrant (as determined pursuant to the
second sentence of Section 8(d)
- 14 -
<PAGE> 70
hereof) for the Trading Day immediately prior to the date on which such
fractional Warrant would have been otherwise issuable. If on any such Trading
Date the Warrants were not publicly held or listed or traded in a manner
described under the second sentence of Section 8(d) hereof, the current market
value of a whole Warrant shall be the fair value of the Warrants on such Trading
Date as determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive.
(2) The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Warrants or to distribute
certificates which evidence fractional shares. Subject to Section 11(c) hereof,
in lieu of such fractional shares of Common Stock, there shall be paid to each
registered holder of a Warrant Certificate with regard to which a fractional
share would otherwise be issuable at the time such Warrant Certificate is
exercised as herein provided, an amount in cash equal to the same fraction of
the current market value of a share of Common Stock. For purposes of this
Section 11(b), the current market value of a share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 8(d)) for the Trading Day immediately prior to the date of
such exercise. If on such Trading Date the Common Stock was not publicly held or
listed or traded in a manner described under the second sentence of Section 8(d)
hereof, the current market value of a share of Common Stock shall be the fair
value of a share of Common Stock as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive.
(3) If the Company is unable to pay any amounts of cash to
registered holders of Warrant Certificates in respect of fractional Warrants or
fractional shares of Common Stock in accordance with Section 11(a) or (b)
hereof, as the case may be, by reason of the provisions of the Company's then
outstanding debt obligations or otherwise, the Company shall deliver to such
holders an additional whole Warrant or share of Common Stock, as the case may
be, in lieu of such fractional Warrants or shares.
(4) The holder of a Warrant, by the acceptance of the Warrant,
expressly waives his right to receive any fractional Warrant or any fractional
share upon exercise of a Warrant.
SECTION XII. Right of Action; No Entitlement to Vote or
Receive Dividends.
(1) Any registered holder of this Warrant Certificate, without
the consent of the holder of any other Warrant Certificate, may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Warrants evidenced by this Warrant
Certificate in the manner provided herein.
(2) Prior to the exercise of the Warrants evidenced hereby and
the date of the certificate representing the shares of Common Stock issuable
upon exercise of such Warrants
- 15 -
<PAGE> 71
pursuant to Section 7 hereof, the holder of this Warrant Certificate, as such,
shall not be entitled to any rights of a stockholder of the Company with respect
to, or be deemed for any purpose the holder of, shares for which the Warrants
shall be exercisable, including, without limitation, the right to vote or to
receive dividends, or other distributions, and shall not be entitled to receive
any notice of any proceedings of the Company, except as provided herein.
SECTION XIII. Agreement of Warrant Certificate Holders. Every
holder of this Warrant Certificate, by accepting the same, consents and agrees
with the Company and with every other holder of a Warrant Certificate that (a)
the Warrant Certificates are transferable only on the registry books of the
Company if surrendered at the principal office of the Company maintained
pursuant to Section 2(b) hereof, duly endorsed or accompanied by a proper
instrument of transfer and (b) the Company may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates) for all purposes whatsoever,
and the Company shall not be affected by any notice to the contrary.
SECTION XIV. Issuance of New Warrant Certificates.
Notwithstanding any of the provisions of this Warrant to the contrary, the
Company may, at its option, issue new Warrant Certificates evidencing Warrants
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under this
Warrant Certificate made in accordance with the provisions of this Warrant
Certificate; provided, that such new Warrant Certificate shall not have terms
inconsistent with the terms of this Warrant Certificate.
SECTION XV. Notice of Proposed Actions. In case the Company
shall propose (a) to pay any stock dividend to the holders of its Common Stock
or to make any other distribution to the holders of its Common Stock (other than
cash dividends paid out of consolidated earnings for the Company's then current
or immediately preceding fiscal year), or (b) to offer to the holders of its
Common Stock rights, warrants or options to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Common Stock (other than a reclassification involving only the subdivision or
combination of outstanding shares of Common Stock), or (d) to effect any
consolidation, merger or sale, transfer or other disposition of all or
substantially all of the property, assets or business of the Company, or (e) to
effect the liquidation, dissolution or winding-up of the Company, then, in each
such case, the Company shall give to the holder of this Warrant, in accordance
with Section 16 hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, or distribution of
rights, warrants or options, or the date on which such reclassification,
consolidation, merger, sale, transfer, disposition, liquidation, dissolution, or
winding-up is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed, and such notice shall be so
given in the manner provided in Section 16 at
- 16 -
<PAGE> 72
least 20 days prior to (i) the record date for the purposes of any action
covered by clause (a) or (b) above or (ii) the date of the taking of such
proposed action or the date of participation therein by the holders of Common
Stock, whichever shall be earlier.
SECTION XVI. Notices. Notices or demands authorized by this
Agreement to be given or made by the holder of this Warrant Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until the holder hereof is notified, in accordance
with this Section 16, in writing by the Company of another address) as follows:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Secretary
Notices and demands authorized by this Agreement to be given or made by the
Company to the holder of this Warrant Certificate shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.
SECTION XVII. Supplements and Amendments. Except as provided
in Section 14 hereof, the Company may not amend this Warrant Certificate without
the consent of the holder hereof.
SECTION XVIII. Governing Law. This Warrant Certificate shall
be governed by and construed in accordance with the laws of the State of New
York without reference to the principles of conflicts of laws.
- 17 -
<PAGE> 73
SECTION XIX. Descriptive Headings. Descriptive headings of the
several Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
GT INTERACTIVE SOFTWARE CORP.
By:
-------------------------
Name:
Title:
Attest:
- ------------------------
Secretary
- 18 -
<PAGE> 74
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto ________________________
_________________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Date: _____________, 19__
___________________________
Signature
(Note: The above signature
must correspond with the
name as written upon the
face of this Warrant
Certificate in all
respects, without any
alteration or change
whatsoever.)
<PAGE> 75
Form of Reverse Side of Warrant Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the
Warrants evidenced by the Warrant Certificate.)
To: GT INTERACTIVE SOFTWARE CORP.
The undersigned hereby irrevocably elects to exercise
___________________ Warrants represented by this Warrant Certificate to purchase
the shares of Common Stock of GT Interactive Software Corp. issuable upon the
exercise of such Warrants and herewith [tenders payment for such shares in the
amount of $_______] [hereby instructs you, in payment of the Purchase Price, to
deduct ___ shares of Common Stock from the number of shares issuable upon
exercise of the Warrants exercised hereby, and to deliver ___ shares of Common
Stock (the net number of shares of Common Stock)] to the undersigned, in
accordance with the terms of this Warrant Certificate. The undersigned requests
that certificates for such shares of Common Stock be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________
(Please print name and address)
_______________________________________________________________ and that such
certificates be delivered to ______________ whose address is __________________.
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________
(Please print name and address)
_______________________________________________________________
<PAGE> 76
Any cash payments to be made in lieu of fractional shares should be made to
____________ whose address is _____________________ and the check representing
payment therefor should be delivered to _____________ whose address is
___________________________.
Date: _____________, 19__
__________________________
Signature
(Note: The above signature
must correspond with the
name as written upon the
face of this Warrant
Certificate in all
respects, without any
alteration or change
whatsoever.)
<PAGE> 77
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December , 1995, by and between GT Interactive Software Corp., a Delaware
corporation (the "Company"), and WMS Industries Inc., a Delaware corporation
(the "Holder"). Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Warrant (as defined below).
WHEREAS, the parties hereto have entered into that certain
GTIS Master Option and License Agreement, dated as of the date hereof, pursuant
to which, among other things, the Company has agreed to issue to the Holder
warrants to purchase a certain number of shares of Common Stock of the Company
(the "Warrants"); and
WHEREAS, the Company desires to provide the Holder with some
liquidity for the Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Common Stock" means the common stock of the Company, no
par value.
"Initial Public Offering" means the Company's initial
Public Offering.
"Public Offering" means the closing of the sale of Common
Stock pursuant to an effective Registration Statement.
"Registration Statement" means a registration statement
filed pursuant to the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shares" means, with respect to the Holder, all shares of
Common Stock issued or issuable upon exercise of the Warrants.
<PAGE> 78
2. Registration Rights.
2.1 Demand Registration.
2.1.1 General. Subject to the GTIS Call described
below, and only so long as Form S-3 (or any equivalent form then in
effect) is available for registration of the Demand Shares referred to
below, at any time after 2 years following the Company's Initial Public
Offering, the Holder may make a written request (the "Demand Request"),
to the Company to register, under the Securities Act and under the
securities or "blue sky" laws of any jurisdiction designated by the
Holder (the "Demand Registration"), the number of Shares (the "Demand
Shares") stated in such request, provided, that the Holder shall not
have sold pursuant to one or more registrations pursuant to Section 2.2
below or otherwise an aggregate of more than two-thirds of the Shares,
prior to the Demand Request; provided, however, that the Company shall
not be obligated to effect more than one registration pursuant to this
Section 2.1. The request for a Demand Registration by the Holder shall
specify the amount of Demand Shares proposed to be sold and the
intended method of disposition thereof.
2.1.2 Company Repurchase Option. (a) Anything to the
contrary in this Section 2 notwithstanding, upon the receipt by the
Company of the Demand Request, the Company shall have the right and
option, in its sole discretion, (the "GTIS Call") to require the Holder
to sell to the Company all, but not less than all of the Warrants
exercisable for the Demand Shares. The Company shall have thirty (30)
days from the date it receives the Demand Request to notify the Holder,
in writing, of its exercise of the GTIS Call and the number of Warrants
to be purchased by the Company (the "Call Exercise Notice").
(b) If the Company shall exercise the GTIS Call,
the Company shall purchase and the Holder shall sell the Warrants
specified in the Call Exercise Notice at a purchase price equal to the
product of (x) the difference between the Exercise Price (as defined in
the Warrants) and the current market price per share (as defined in the
Warrants) on the date of the Call Exercise Notice and (y) the number of
shares for which the Warrants being purchased pursuant to the GTIS Call
are exercisable.
(c) The closing of the GTIS Call exercised by the
Company pursuant to this Section 2.1.2 shall be held at the principal
office of the Company at 11:00 a.m., local time on the 45th day after
the giving of the Call Exercise Notice or at such other time and place
as the parties to the transaction may agree. At such closing, the
Holder shall deliver the Warrants, duly endorsed for transfer and
accompanied by all requisite transfer taxes, if any, and such Warrants
shall be free and clear of any and all liens, claims, options, charges,
encumbrances and security interests of any nature and the Holder shall
so represent and warrant to the Company. In addition, the Holder shall
further represent and warrant that it is the beneficial and record
- 2 -
<PAGE> 79
owner of such Warrants. At the closing, the Company shall deliver
payment in full in immediately available funds for the Warrants being
purchased, unless the parties otherwise agree. At such closing, all of
the parties to the transaction shall execute such additional documents
as are otherwise necessary or appropriate to effect the transfer of the
Warrants.
2.1.3 Effective Demand Registration. The Company shall
use its reasonable efforts to file as promptly as practicable and cause
the Demand Registration pursuant to Section 2.1.1 to become effective
not later than 120 days after the Company receives the Demand Request
from the Holder; provided that such Demand Request shall not have been
withdrawn by the Holder pursuant to the terms hereof. A registration
shall constitute a Demand Registration (a) if it has become effective
and remains effective for the lesser of (i) 120 days and (ii) the
completion of the sale, pursuant to such registration statement, of all
of the Shares covered thereby and (b) irrespective of the number of
Demand Shares included in such registration.
2.1.4 Underwriting Adjustment. If the Demand
Registration pursuant to Section 2.1.1 involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing that, in its opinion, the number of shares of Common Stock
requested to be included in such registration exceeds the number which
can be sold in such offering without adversely affecting the price per
share which may be obtained by the holders of the Demand Shares, the
Company will include in such registration, to the extent of the number
of shares of Common Stock which the Company is so advised can be sold
in such offering, (a) first, the Demand Shares and (b) second, all
other shares of Common Stock proposed to be included in such
registration, on a pro rata basis.
2.2 Incidental or "Piggyback" Registration.
2.2.1 General. If the Company proposes to register any
shares of Common Stock under the Securities Act (other than pursuant to
a Registration Statement on Form S-4, S-8 or any equivalent form then
in effect) for public sale for its own account or for the account of
any stockholder, at any time after the Initial Public Offering and on
or prior to the seventh anniversary of the Initial Public Offering, the
Company shall give to the Holder notice of such proposed registration
at least fifteen (15) days prior to the filing of a Registration
Statement with respect to such public sale. Upon the written request of
the Holder (the "Incidental Request") delivered to the Company within
ten (10) days after the receipt of the notice from the Company (which
request shall state the number of Shares (the "Incidental Shares") that
such Holder wishes to sell or distribute publicly under such
Registration Statement proposed to be filed by the Company), the
Company shall use its reasonable efforts to include such Shares in such
registration, and to cause such registration to become and remain
effective to the extent and for so long as the Company keeps such
registration effective as to such other
- 3 -
<PAGE> 80
shares of Common Stock (the "Incidental Registration"); provided that
such Incidental Request shall not have been withdrawn by the Holder
pursuant to the terms hereof.. The Company may withdraw a Registration
Statement at any time before it becomes effective or postpone or
terminate the offering without obligation to the Holder.
2.2.2 Underwriting Adjustment. If the Incidental
Registration pursuant to Section 2.2.1 involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing that, in its opinion, the number of shares of Common Stock
requested to be included in such registration exceeds the number which
can be sold in such offering without adversely affecting the price per
share which may be obtained by the holders of the Incidental Shares,
the Company will include in such registration, to the extent of the
number of shares of Common Stock which the Company is so advised can be
sold in such offering, (a) first, shares of Common Stock that the
Company proposes to issue and sell for its own account, if any, (b)
second, shares a stockholder proposes to include in such registration
pursuant to the exercise of demand registration rights, if any, and (c)
third, all other shares of Common Stock (including Incidental Shares)
proposed to be included in such registration, on a pro rata basis.
2.3 Registration Procedures. With respect to any
Registration Statement that includes any Shares pursuant to Sections 2.1 and
2.2:
2.3.1 Underwriters.
(a) In the event of a Demand Registration
pursuant to Section 2.1, the Holder may select and obtain an investment
banking firm (which shall be of national reputation) to act as the
managing underwriter of the offering; provided, that, such underwriter
shall be acceptable to the Company.
(b) In the event of an Incidental Registration
pursuant to Section 2.2, the distribution for the account of the Holder
shall be underwritten by the same underwriters, if any, who underwrite
the distribution of the securities for the account of the Company
and/or any other persons whose securities are covered by such
Registration Statement.
2.3.2 Legal Opinions. In connection with a Demand
Registration or an Incidental Registration, the Holder shall retain
counsel and shall cause such counsel to deliver (a) to the managing
underwriter such opinions as the managing underwriter may reasonably
require and (b) to the Company and the Securities and Exchange
Commission, such opinions as they shall require.
2.3.3 Execution of Documents. In connection with a
Demand Registration or an Incidental Registration, the Holder shall (a)
upon request of the
- 4 -
<PAGE> 81
Company, execute power of attorney, deposit and custodian agreements in
form and substance satisfactory to the managing underwriter and (b)
execute an underwriting agreement in form and substance satisfactory to
the managing underwriter, which underwriting agreement shall contain
certain indemnification provisions as provided in Section 2.4 or as
required by the managing underwriter.
2.3.4 Registration Statement. The Company will deliver
to the Holder, after the effectiveness of any Registration Statement,
such reasonable number of copies of a definitive prospectus included in
such Registration Statement and of any revised or supplemental
prospectus as the Holder may from time to time request.
2.3.5 Expenses. In connection with the registration of
Demand Shares and Incidental Shares pursuant to Sections 2.1 and 2.2,
the Company shall pay all reasonable expenses (other than underwriting
discounts and commissions) whether or not such Demand Registration or
Incidental Registration becomes effective; provided, however, the
Company shall not be obligated to pay such expenses if the failure of
the Demand Registration or the Incidental Registration to become
effective is a result of the action or request by the Holder, unless
the Holder agrees to forfeit the registration right granted pursuant to
Section 2.1; and provided, further, that the Company shall not be
obligated to pay any expenses relating to any extraordinary accounting
review or special audit. If the Company believes any extraordinary
accounting review or special audit will be necessary in connection with
such registration, it shall advise the Holder, who may withdraw such
Holder's Demand Request or Incidental Request, as the case may be,
within 5 days of the receipt of such advice by the Company.
2.3.6 Hold-Back.
(a) In the event Shares are included in a
Registration Statement hereunder, the Holder agrees not to effect any
public sale or distribution of shares of Common Stock during the seven
days prior to, and during the ninety (90) day period following, the
effective date of such Registration Statement or such longer period as
shall be requested by the managing underwriter, but in no event longer
than 180 days (except as part of such registration), if and to the
extent requested by the Company or by the managing underwriter or
underwriters of such registration.
(b) The Company agrees not to effect any public
sale or distribution of any of its securities for its own account
(except pursuant to registrations on Form S-4 or S-8 or any equivalent
form then in effect) during the ninety (90) day period beginning on the
later of (i) the effective date of any Registration Statement in which
the Holder is participating and (ii) the commencement of a public
distribution of the shares of Common Stock pursuant to such
Registration Statement.
- 5 -
<PAGE> 82
2.3.7 Registration Delay. Anything to the contrary
contained in this Agreement notwithstanding, if the Company shall
furnish to the Holder, in connection with a Demand Registration or an
Incidental Registration, written notification that in the Company's
opinion, it would be detrimental to the Company and its stockholders
for a registration statement to be filed at that time and it is,
therefore, necessary to defer the filing of such registration
statement, the Company shall have the right to defer taking action with
respect to such filing for a period of not more than 90 days after
receipt of the Demand Request or the Incidental Request, as the case
may be.
2.3.8 Limitation on Demand and Incidental Registration
Rights. Anything to the contrary contained in this Agreement
notwithstanding, when, in the opinion of counsel for the Company (which
counsel shall be experienced in securities law matters), registration
of the Shares is not required by the Securities Act and other
applicable securities laws, in connection with a proposed public sale
of such Shares, the Holder shall have no rights, pursuant to this
Section 2, to request a Demand Registration or an Incidental
Registration, as the case may be, in connection with such proposed
sale.
2.4 Indemnity. In the case of any registration of Shares
pursuant to this Section 2, the Company will indemnify and hold harmless the
Holder under Sections 2.1 and 2.2 hereof (the "Indemnitee"), and any person who
controls such Indemnitee or underwriter within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages, liabilities and expenses
(collectively, "Losses") resulting from any untrue statement or allegedly untrue
statement of a material fact contained in any Registration Statement or
preliminary or final prospectus contained therein, or any amendment or
supplement thereto, or from any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in light of the circumstances under which they were made) not
misleading, except insofar as the same may have been based on (a) information
furnished in writing to the Company by such Indemnitee or such underwriter
expressly for use therein and used in accordance with such writing or (b) the
failure of the underwriter to send or give a copy of the final prospectus (or
any amendment or supplement thereto) to the person asserting the untrue
statement or omission or alleged omission at or prior to the sale of the Shares
to such person if such statement was corrected in the final prospectus. The
Indemnitee, by acceptance of the provisions herein, agrees to furnish to the
Company such information concerning such Indemnitee and the proposed sale or
distribution as shall, in the opinion of counsel for the Company, be necessary
in connection with any such registration or qualification of any Demand Shares
or Incidental Shares, and to indemnify and hold harmless the Company, its
officers, directors, employees and agents and each of its underwriters (and any
person who controls the Company or such underwriters within the meaning of
Section 15 of the Securities Act) against all Losses resulting from any untrue
statement or allegedly untrue statement of a material fact contained in any
Registration Statement or preliminary or final prospectus contained therein, or
any amendment or supplement thereto, or from any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements
- 6 -
<PAGE> 83
therein (in light of the circumstances under which they were made) not
misleading, insofar as the same may have been based on information furnished in
writing to the Company by such Indemnitee or to such underwriter expressly for
use therein and used in accordance with such writing, but not insofar as the
same may have been based on the failure of the underwriter to send or give a
copy of the final prospectus (or any amendment or supplement thereto) to the
person asserting the untrue statement or omission or alleged omission at or
prior to the sale of the Shares to such person if such statement was corrected
in the final prospectus. In no event shall the liability of the Indemnitee
hereunder be greater than the dollar amount of the proceeds received by such
Indemnitee upon the sale of the Shares giving rise to the aforesaid
indemnification obligation.
3. Miscellaneous.
3.1 Notices. All notices or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally, telecopied
or sent be certified, registered or express mail or, if mailed, five days after
the date of deposit in the United States mail, as follows:
(a) if to the Company:
GT Interactive Software Corp.
116 East 40th Street
New York, New York 10016
Attention: Harry Rubin
Telecopy: (212) 213-9319
with a copy to:
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022-3903
Attention: David P. Levin, Esq.
Telecopy: (212) 715-8000
(b) if to WMS Industries Inc.:
3401 North California Avenue
Chicago, Illinois 60618
Attention: Neil D. Nicastro, President
Telecopy: (312) 539-2099
- 7 -
<PAGE> 84
with a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Attention: Jeffrey Siegel, Esq.
Telecopy: (212) 730-1964
Any party may, by notice given in accordance with this Section 3.1, designate
another address or person for receipt of notices hereunder.
3.2 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies
provided for herein are cumulative and are not exclusive of any
remedies that may be available to the parties hereto at law, in equity
or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms
of any provision of this Agreement, shall be effective only if it is
made or given in writing and signed by the party against whom
enforcement thereof is sought.
3.3 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
3.4 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
3.5 Entire Agreement. This Agreement is intended by the
parties as a final expression of this agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
- 8 -
<PAGE> 85
3.6 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
3.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state, without regard
to the principles of conflicts of law thereof.
3.8 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement and the rights and obligations hereunder
are not assignable by the Holder without the prior written consent of the
Company.
3.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first written above.
GT INTERACTIVE SOFTWARE CORP.
By:_____________________________
Name:
Title:
WMS INDUSTRIES INC.
By:_____________________________
Name:
Title:
- 9 -
<PAGE> 1
EXHIBIT 10.10
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
AMENDMENT TO
GTIS MASTER OPTION AND LICENSE AGREEMENT
This amendment agreement (the "Amendment") is made and entered into
the 31st day of March, 1995, by and among WMS INDUSTRIES INC. ("WMS"),
WILLIAMS ELECTRONICS GAMES, INC. ("WEG"); MIDWAY MANUFACTURING COMPANY
("Midway") and WILLIAMS ENTERTAINMENT INC. ("WEI"), each being Delaware
corporations with offices at 3401 North California Avenue, Chicago, Illinois
60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware corporation with
offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, on December 28, 1994 WMS, WEG, Midway, WEI and GTIS entered
into the GTIS Master Option and License Agreement (the "GTIS Master Agreement")
pursuant to which the "WMS Group" granted to GTIS certain rights with respect
to the manufacture, distribution and sale of "Games" for use on "Designated
Multipurpose Computer Platforms" (as those terms are defined in the GTIS Master
Agreement); and
WHEREAS, WMS, WEG, Midway, WEI and GTIS desire to amend the GTIS
Master Agreement to extend the term thereof, provide for an increase in
the amount of the
<PAGE> 2
"Option and Advance Fee" payable thereunder, and for other purposes, as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the parties hereto
hereby agree as follows:
1. Capitalized terms used, but not defined herein, shall have
the meanings ascribed in the GTIS Master Agreement or the form of Home Computer
Software Distribution and License Agreement annexed to the GTIS Master
Agreement as Exhibit A. In addition, the GTIS Master Agreement is amended to
add a new Section 1.4A to read in its entirety as follows:
1.4A "GTIS" shall mean GTIS or any affiliate of GTIS to
whom any rights to exploit any Accepted Games granted hereunder may
be sublicensed. An affiliate of GTIS shall refer to an entity, a
majority of whose capital stock is owned directly or indirectly by
GTIS or with respect to which during the term of this Agreement, GTIS,
directly or indirectly, has the legal power without the consent of any
third party to direct the manufacture, distribution or sale of
Accepted Games.
2. The GTIS Master Agreement shall be amended to extend the term
thereof from three (3) years to five (5) years and to modify provisions
relating to the "Extension Events." Accordingly, Section 2.1 thereof is hereby
amended and restated to read in its entirety as follows:
2.1 The WMS Group hereby grants to GTIS a first option to
acquire a license, in the form of the Home Computer Software
Distribution and License Agreement, to manufacture, distribute and
sell versions of the Game for use solely on Designated Multipurpose
Computer Platforms, with respect to (a) Previously Developed Games,
(b) new Games First Released by the WMS Group during the five (5) year
period commencing March 22, 1995 and expiring March 31, 2000 (the
"Initial Option Period"), and (c) Games which
2
<PAGE> 3
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
were offered to Acclaim Entertainment, Inc. ("Acclaim") between
December 28, 1994 and March 21, 1995, but are not accepted by Acclaim
("Interim Period Games"). If either of the "Extension Events"
described below shall have occurred prior to April 1, 1998, the
Initial Option Period shall be deemed extended to March 31, 2001.
Extension Events shall mean either (i) the WMS Group shall have
received not less than * Dollars in the aggregate from royalties paid
under Home Computer Software Distribution and License Agreements and
the Option and Advance Fee or from voluntary payments by GTIS,
provided that the amount of voluntary payments which may be utilized
to calculate the attainment of the Extension Event shall not exceed *
Dollars; or (ii) the market value of the shares of stock which may be
acquired by WMS upon exercise of the Warrants provided for in Section
4 hereof shall have increased by at least * Dollars as compared to the
market value of such shares on the date the Warrants were issued and
an amount of such shares have been purchased or are currently
purchasable under the Warrants and have been sold or are publicly
saleable by WMS as have permitted or will permit WMS to realize such *
Dollars increase. For purposes hereof shares shall be considered
publicly saleable (A) if they are saleable under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"),
or any similar rule hereafter in effect; (B) if, in the opinion of
counsel to GTIS, such shares may be publicly sold under Section 4(1)
or otherwise publicly sold without registration under the Securities
Act; (C) if such shares have been registered for sale and are saleable
under an effective registration statement duly filed under the
Securities Act; (D) if WMS has a demand registration right then
available under the registration rights agreement annexed hereto as
Exhibit B; or (E) if GTIS has duly exercised the GTIS Call as that
term is defined in such registration rights agreement. In calculating
the amount the WMS Group has received for purposes of clause (i)
above, payments made with royalty reports received prior to May 16,
1998 shall be included.
On or about April 1, 1999, or, if either of the Extension
Events shall have occurred prior to April 1, 1998, then on or about
April 1, 2000, the WMS Group and GTIS shall enter into good faith
negotiations with respect to an extension (or further extension) of
the term of the GTIS Master Agreement. If the parties are unable to
reach agreement with respect to such extension, despite such good
3
<PAGE> 4
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
faith negotiations, the WMS Group shall be free (i) to negotiate with
and enter into an agreement with any third party or parties relating
to the granting of licenses for the manufacture, distribution, sale or
other exploitation of the Games or any future Games on Designated
Multipurpose Computer Platforms, on whatever terms and conditions it
may deem appropriate (a "Third Party License"), or (ii) to retain and
exploit such rights itself or through any affiliated entity, in each
case with respect to periods following the expiration of the term
hereof, provided, however, that if prior to the expiration of the term
hereof, the WMS Group shall propose to enter into a Third Party
License as contemplated in clause (i) above, it shall first give GTIS
written notice thereof and the right, for a period not to exceed
thirty (30) days, to enter into an agreement with the WMS Group on the
same terms and conditions as such Third Party License. Nothing herein
shall be deemed to require the parties to enter into any agreement
with respect to periods following the expiration of the term hereof or
in any way to inhibit the WMS Group from retaining and exploiting any
rights with respect to the Games or any future Games itself or through
any affiliated entity following the expiration of the term hereof.
References to the Initial Option Period in Section 1.6 are hereby
deleted.
3. Section 3 of the GTIS Master Agreement shall be amended to
increase the amount of the Option and Advance Fee from * Dollars to * Dollars
and to provide for payment thereof and additional security therefor.
Accordingly, Section 3 of the GTIS Master Agreement is hereby amended and
restated to read in its entirety as follows:
3. OPTION FEE AND GUARANTEED ADVANCE ROYALTY. In
consideration for the option granted herein and as a guaranteed
advance royalty, GTIS agrees to pay to WMS a fee in the amount of *
Dollars (the "Option and Advance Fee") and to issue the Warrants as
set forth in Paragraph 6 below. The Option and Advance Fee shall be
payable in installments as follows: * Dollars was paid by wire
transfer to WMS in immediately available funds on December 28, 1994; *
Dollars shall be paid by wire transfer to WMS in immediately available
funds on the date hereof; * Dollars shall be paid on or before
December 28, 1995 and * Dollars shall be paid
4
<PAGE> 5
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
on or before December 28, 1996. It is understood that under no
circumstances shall the WMS Group be required to repay any portion of
such amounts nor shall GTIS be entitled to any set off or to claim the
right not to pay any portion of such amounts for any reason; provided
that GTIS shall be entitled to recoup such payments out of royalties,
to the extent provided in the Home Computer Software Distribution and
License Agreements entered into pursuant to this Agreement. If the
payment due on December 28, 1995 is not paid in full when due, the
payment otherwise due December 28, 1996 shall become immediately due
and payable. The obligation to make such deferred payments is being
fully secured as follows: (a) a clean standby letter of credit in
the amount of * Dollars, issued by Republic National Bank was
heretofore delivered to WMS on December 29, 1994, and (b) a clean
standby letter of credit in the amount of * Dollars, issued by
Republic National Bank shall be delivered to WMS not later than March
31, 1995. GTIS shall be responsible for all costs and expenses,
including legal fees, which may be incurred by WMS in connection with
its collection of the deferred payments. WMS shall permit GTIS from
time to time to exchange the original or any substitute letters of
credit for other substitute letters of credit, provided that the
newest substitute letters of credit are (i) issued by Republic
National Bank or another bank acceptable to WMS, (ii) the amounts of
the newest substitute letters of credit are not less than the amounts
then owed with respect to the above described deferred payments, and
(iii) the newest substitute letters of credit otherwise contain the
same terms and conditions as are contained in the letter of credit for
which it is being substituted. GTIS has advised the WMS Group of its
intention to effect an initial public offering ("IPO") of its common
stock or preferred stock convertible into common stock during the
Initial Option Period. In the event that GTIS shall complete such IPO
during the Initial Option Period and, as a result thereof, the
additional or paid-in capital of GTIS shall be increased by at least *
Dollars, as shown on a balance sheet of GTIS certified by its
independent certified public accountants and furnished to the WMS
Group, then the WMS Group shall permit GTIS to cancel the letters of
credit securing the remaining deferred installments of the Option and
Advance Fee. Cancellation of such letters of credit shall in no way
relieve GTIS of its obligation to make payment of all remaining
installments of the Option and Advance Fee as set forth above.
5
<PAGE> 6
4. Section 8 of the GTIS Master Agreement and Section 16
of the Home Computer Software Distribution and License Agreement are each
amended to provide for additional copies of notices by adding the following:
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 951-2379
Facsimile Number: (212) 679-6850
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
5. Section 10.1 of the GTIS Master Agreement shall be
amended and restated to read in its entirety as follows:
10.1 This Agreement is personal to GTIS as one party and the
WMS Group as the other party. Neither this Agreement nor any party's
rights under it may be assigned, in whole or in part, nor may its
obligations be delegated, in whole or in part, to any person or party
without the prior written consent of the other party, except that any
party may assign its rights and delegate obligations to any of its
direct or indirect wholly-owned subsidiaries or affiliates or to any
person, firm or corporation owning or acquiring all or substantially
all of the stock or assets of that party, as long as that party
remains fully liable for its obligations hereunder. Any sale of all
or substantially all of the assets of any member of the WMS Group
shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by the seller pursuant to
the terms of this Agreement, including its obligations with respect to
Games and the intellectual property from which they are derived.
6
<PAGE> 7
This Agreement shall bind the parties, their successors and permitted
assignees and delegees. The members of the WMS Group, as one party,
and GTIS (including its sublicensees and affiliates as one party) are
each jointly and severally liable for their respective obligations
under the terms of this Agreement.
6. The representations and warranties of the WMS Group,
as set forth in Section 5 of the GTIS Master Agreement, and the representations
and warranties of GTIS, as set forth in Section 6 of the GTIS Master Agreement,
shall be deemed restated and confirmed by the parties, respectively, as of the
date hereof and references therein to the GTIS Master Agreement shall be deemed
to refer to the GTIS Master Agreement as amended hereby.
7. Section 3.1 of the Home Computer Software
Distribution and License Agreement shall be amended to eliminate North and
South Korea, Hong Kong, China (PRC), Taiwan (ROC), Malaysia, Singapore,
Philippines, Indonesia, Thailand, India and Pakistan from inclusion in the term
"Excluded Asian Countries." All references to "Excluded Asian Countries" shall
be deemed to refer only to Japan.
8. Sections 6.1 and 6.2 of the Home Computer Software
Distribution and License Agreement shall be amended and restated to read in
their entirety as follows:
6.1 Licensee agrees to forward to Licensor, within
forty-five (45) days after the end of each calendar quarter ("Royalty
Period"), commencing with the first calendar quarter during which any
unit of the Licensed Product is sold, a report, in reasonable detail
and reported separately, by Marketing Area, of the number of units and
average wholesale price (by sales bracket, as provided in Schedule B
hereof) of the Licensed Products sold within such Royalty Period and
the royalty amount due for the sale of such units calculated in
accordance with Section ? below and any recoupment claimed in
accordance with Schedule B annexed hereto, and Section ? of the GTIS
Master Agreement. For purposes hereof, the term "Marketing Area"
shall include North America (as such term is defined in the GTIS
Master Option and License Agreement (Home Video Games) between the
parties,
7
<PAGE> 8
dated March 31, 1995, and each of the other Marketing Areas designated
on Schedule C to Exhibit A of such GTIS Master Option and License
Agreement (Home Video Games). Such report shall also include a
cumulative reconciliation of the number of units of Licensed Products
produced by Licensee to the number of units on hand. Licensee agrees
that accompanying each such report shall be payment, in U. S. funds,
of the amounts due to Licensor, if any, in respect of such Royalty
Period in excess of any permitted recoupment. Royalties calculated in
foreign currencies shall be converted to U. S. currency at the spot
rate of exchange published in the Wall Street Journal as of the last
day of the Royalty Period. Such reports shall be required to be
submitted with respect to sales and distributions of the Licensed
Product whether or not any amounts are due under the terms hereof.
6.2. Licensee agrees to keep accurate books of account and
records with respect to the Licensed Products, covering all sales,
purchases and inventories of Licensed Products and all royalty fees
due under this Agreement at Licensee's offices (or the offices of
Licensee's affiliates) and to permit (or procure the right for)
Licensor at its own expense to have accounting professionals (which
may include Licensor's employees who have accounting degrees) inspect
such books of account and records of Licensee or its sublicensees
during reasonable business hours (but not during the first three weeks
of a calendar quarter), upon prior reasonable written notice, for the
sole purpose of verifying the reports to be provided hereunder. Such
inspections, together with inspections of Licensee's books of account
and records pertaining to other Computer Games licensed to Licensee by
Licensor or its affiliates under Other Home Computer Software
Distribution and License Agreements, shall occur no more frequently
than twice during any twelve (12) month period for each of the
Licensee's offices. Licensor's inspectors shall not be physically
present in a specific office of Licensee for more than 10 consecutive
business days in connection with any such inspection, provided that
Licensee shall have supplied all requested information and
documentation and responded to questions on a reasonably prompt basis.
Licensee shall promptly furnish to Licensor copies of any report which
Licensee may produce as the result of any audit by Licensee of the
books of account and records of any sublicensee of Licensee. Licensor
shall keep any information obtained from any such inspections in
confidence and shall require that its accounting professionals do so
as well. Licensee's books relating to any particular royalty
statement may be examined as aforesaid only
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
within two (2) years after the date rendered and Licensee shall have
no obligation to permit Licensor to so examine such books relating to
any particular royalty statement more than once for any one statement,
unless in connection with a civil action filed by Licensor against
Licensee in connection with such statement. In the event that any
audit by Licensor's accounting professionals reveals that Licensee has
underpaid Licensor by an aggregate of * or more with respect to the
specific royalty statements which are the subject of such audit,
Licensee agrees that it shall also reimburse Licensor for the
reasonable documented costs for any such audit (including traveling
costs) up to the amount of the shortfall.
9. Section 6.3 of the Home Computer Software Distribution and
License Agreement shall be amended to correct the third sentence thereof to
read as follows: "Not less than * of the balance of the shipment, less actual
returns, shall be deemed a sale for royalty purposes six (6) months following
the date of shipment, and the balance of such shipment, less actual returns
not already counted, shall be deemed a sale for royalty purposes twelve (12)
months following the date of shipment."
10. Section 6 of the Home Computer Software Distribution and
License Agreement shall be amended to include the following new Section 6.6 and
6.7:
6.6 Licensee recognizes that the timely submission of all
reports required to be submitted to Licensor pursuant to Section 6.1
hereof is critical for Licensor to maintain good relations with its
third party licensors as well as for Licensor's own financial
reporting requirements. Therefore, in addition to any other rights and
remedies of Licensor, if Licensee shall be late by more than five (5)
business days with respect to any report and/or royalty payment
required to be submitted to Licensor pursuant to Section 6.1 hereof
(a "Late Report"), then Licensee shall pay to Licensor a late charge
("Late Charge") at a rate equal to the prime rate designated by
Citibank N.A. on any royalties covered by such Late Report that are
actually payable to Licensor as provided in Schedule B. Such Late
Charge
9
<PAGE> 10
shall be computed from the 46th day following the last day of the
calendar quarter for which such Late Report is due until the date
actually paid. Licensor may elect to waive payment of any such Late
Charge if Licensee shall have provided a reasonable estimate of
royalties due within fifteen (15) days following the end of the
calendar quarter covered by such Late Report.
6.7 At the time that the Licensor shall provide to
Licensee notice of availability of a Game pursuant to Section 2.4 or
2.5 of the GTIS Master Agreement, Licensor shall provide to Licensee
sufficient data to enable Licensee to calculate Third Party Fees and
Royalties payable with respect to each Licensed Product (without
regard to any advances which may have been made by Licensor). If
Licensee is unable to calculate specific Third Party Fees and
Royalties from the data provided, Licensee may request assistance from
Licensor with respect thereto, and Licensor shall use its best efforts
to respond within seven (7) days from the date of such request, but
Licensee shall provide all sales and other data in its possession
which are necessary for such calculations.
11. The second sentence of Section 7.4 of the Home Computer
Software Distribution and License Agreement shall be amended and restated to
read in its entirety as follows:
Subsequent to final approval, Licensor may request the Licensee
once each quarter to send, without charge, a reasonable number of
production samples (but in any event not less than two (2) copies of
each language version) without payment of any royalty hereunder to
Licensor to ensure quality control.
12. Section 17.1 of the Home Computer Software Distribution
License Agreement shall be amended and restated to read in its entirety as
follows:
17.1 This Agreement is personal to Licensee as one party and
Licensor as the other party. Neither this Agreement nor any party's
rights under it may be assigned, in whole or in part, nor may
Licensee's or Licensor's rights or obligations hereunder be delegated,
in whole or in part, to any person or party without the prior written
consent of the other party, except that any party may assign its
rights and delegate obligations to any of its direct or indirect
wholly-owned subsidiaries or affiliates or to any person,
10
<PAGE> 11
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
firm or corporation owning or acquiring all or substantially all of
the stock or assets of that party, as long as that party remains fully
liable for its obligations hereunder. Any sale of all or
substantially all of the assets of Licensor shall include a
requirement for the assumption by the purchaser of all covenants,
obligations and duties undertaken by the seller pursuant to the terms
of this Agreement, including its obligations with respect to Games and
the intellectual property from which they are derived. This Agreement
shall bind the parties, their successors and permitted assignees and
delegees. Licensor as one party, and Licensee as the other party, are
each liable for their respective obligations under the terms of this
Agreement.
13. Schedule "B" annexed to the Home Computer Software
Distribution and License Agreement shall be amended to include the following
provision:
Where Licensor has acquired from a third party a Licensed
Property in connection with which Third Party Fees and Royalties
amounting to * or more of Licensee's estimated Net Wholesale Sales
Price are payable, Licensee may elect, at the time it elects to
accept the Licensed Product under the GTIS Master Agreement, to pay a
substitute royalty ("Substitute Royalty") therefor, which will reduce
only the highest royalty based upon the Net Wholesale Sales Price of
the Licensed Product otherwise payable pursuant to the royalty table
included in this Schedule "B." For example, if the Substitute Royalty
for a Licensed Product is *, this would apply to units sold at Net
Wholesale Sales Prices of * and above; for lower Net Wholesale Sales
Prices, the royalty percentages and corresponding Net Wholesale Sales
Prices reflected in the royalty table would not be changed, except
that the royalty percentage may not exceed the amount of the
Substitute Royalty.
The Substitute Royalty shall be computed by comparing the
gross profit of Licensor (i.e., royalty earned, less * Third Party
Fees and Royalties, less * of Shared Institutional Advertising, as
such term is hereinafter defined) to the gross profit of Licensee
(i.e., Net Wholesale Sales Price, less royalty payable to Licensor,
less * Third Party Fees and Royalties, less product manufacturing
cost, less * of Shared Institutional Advertising, less * of Net
Wholesale Sales Price (equivalent to Licensee's operating costs,
11
<PAGE> 12
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
excluding overhead)); and determining the royalty percentage that
would yield the same gross profit for both Licensor and Licensee. The
computation of the Substitute Royalty for any year shall be adjusted
following the end of such year for the prior year to reflect changes
in all of the components set forth above, except for the * figure
referenced above, during such prior year and any increase or decrease
in the Substitute Royalty resulting from such adjustment shall be
reflected on the royalty statement for the first Royalty Period of the
following year.
Where the Licensed Property (whether acquired from a third
party or developed by Licensor or any of its affiliates in house) is
not embodied in a coin-operated video or pinball game distributed by
Licensor or any of its affiliates, or will not be embodied in a
coin-operated video or pinball game distributed by Licensor or any of
its affiliates within 60 days from the release of the Licensed
Product, institutional advertising costs (i.e., radio, television and
print advertising to the general public), will be shared equally
("Shared Institutional Advertising") by Licensee and Licensor,
provided that (a) the portion of the Shared Institutional Advertising
costs to be borne by Licensor shall not exceed * of the Net Wholesale
Sales Price of the Licensed Product, and shall only be payable in that
portion of the Licensed Territory in which Licensee itself (and not
its sublicensees) actually pays for institutional advertising costs
and (b) all such Shared Institutional Advertising costs and budgets
therefor shall have been previously approved in writing by Licensor.
Licensee at its own cost and expense shall be solely responsible for
all in store and cooperative advertising costs associated with the
sale of Licensed Products in the Licensed Territory.
14. The section entitled "Adjustments to Royalties" in Schedule
"B" annexed to the Home Computer Software Distribution and License Agreement
shall be amended to change the references to "sublicensees" appearing in
Paragraph 2 thereof to "non-affiliated third party sublicensees" and to change
the reference to the "* Option and Advance Fee" appearing in Paragraph 3
thereof to the "* Option and Advance Fee."
12
<PAGE> 13
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
15. The section entitled "Recoupment" in Schedule "B"
annexed to the Home Computer Software Distribution and License Agreement shall
be amended to reflect the change in the amount of the Option and Advance Fee
and the recoupment of installments paid on account thereof, and accordingly, is
amended and restated to read in its entirety as follows:
RECOUPMENT
Licensee shall be entitled to apply the aggregate amount by
which (a) royalties paid under this Agreement exceed (b) * of the
amount of any Third Party Fees and Royalties payable by Licensor to
parties having rights with respect to the sale of Licensed Products
(the "Recoupable Amount") to recoup the * Option and Advance Fee paid
by Licensee to WMS Industries Inc. pursuant to Section 3 of the GTIS
Master Agreement, until such Recoupable Amount together with
Recoupable Amounts under any other Home Computer Software Distribution
and License Agreement entered into by Licensee pursuant to the GTIS
Master Agreement ("Other Home Computer Software Distribution and
License Agreements") equal *; provided, however, that (i) to the
extent that the aggregate of all Recoupable Amounts under this
Agreement and the Other Home Computer Software Distribution and
License Agreements between December 28, 1994 and December 28, 1995
exceeds the installments of the Option and Advance Fee paid on
December 28, 1994 and March 31, 1995, such excess shall be paid to
Licensor and the licensors under the Other Home Computer Software
Distribution and License Agreements, in accordance with their
respective interests, and applied in reduction of the installment of
the Option and Advance Fee payable under the GTIS Master Agreement on
December 28, 1996, up to a maximum reduction of *, and the balance of
such excess, if any, shall be applied first in reduction of the
installment of the Option and Advance Fee payable on December 28,
1995, and then in reduction of the installment of the Option and
Advance Fee payable on December 28, 1996, and (ii) to the extent that
the aggregate of all Recoupable Amounts under this Agreement and all
Other Home Computer Software Distribution and License Agreements
between December 28, 1994 and December 28, 1996 exceeds the unrecouped
portion of the installments of the Option and Advance Fee paid on
December 28, 1994, March 31, 1995, and
13
<PAGE> 14
December 28, 1995, the excess shall be paid to Licensor and the
licensors under the Other Home Computer Software Distribution and
License Agreements, in accordance with their respective interests, and
applied in reduction of the installment of the Option and Advance Fee
payable on December 28, 1996.
16. Except as otherwise set forth herein, the terms and
conditions of the GTIS Master Agreement remain unchanged and shall remain in
full force and effect in accordance with its terms.
17. This Amendment may be executed in counterparts each of which
shall be deemed an original and when taken together shall be deemed one and the
same document.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WMS INDUSTRIES INC
By: /s/ Neil D. Nicastro
----------------------------------------
WILLIAMS ELECTRONICS GAMES, INC.
By: /s/ Neil D. Nicastro
----------------------------------------
MIDWAY MANUFACTURING COMPANY
By: /s/ Neil D. Nicastro
----------------------------------------
WILLIAMS ENTERTAINMENT INC.
By: /s/ Byron Cook
----------------------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Joe Cayre
----------------------------------------
<PAGE> 1
EXHIBIT 10.11
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
SECOND AMENDMENT TO
GTIS MASTER OPTION AND LICENSE AGREEMENT
This second amendment agreement (the "Second Amendment") is made and
entered into the 27th day of March, 1996, by and among WMS INDUSTRIES INC.
("WMS"), WILLIAMS ELECTRONICS GAMES, INC. ("WEG"), MIDWAY MANUFACTURING
COMPANY ("Midway") and WILLIAMS ENTERTAINMENT INC. ("WEI"), each being Delaware
corporations with offices at 3401 North California Avenue, Chicago, Illinois
60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware corporation with
offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, on December 28, 1994 WMS, WEG, Midway, WEI and GTIS entered
into the GTIS Master Option and License Agreement (the "GTIS Master PC
Agreement") pursuant to which the WMS Group granted to GTIS certain rights with
respect to the manufacture, distribution and sale of versions of Games for use
on Designated Multipurpose Computer Platforms; and
WHEREAS, on March 31, 1995, WMS, WEG, Midway, WEI and GTIS entered
into an Amendment to the GTIS Master PC Agreement (the "First Amendment");
<PAGE> 2
and
WHEREAS, WMS, WEG, Midway, WEI and GTIS desire to further amend the
GTIS Master PC Agreement as provided for in this Second Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Capitalized terms used, but not defined or revised herein,
shall have the meaning ascribed to such terms in the GTIS Master PC Agreement
or the form of Home Computer Software Distribution and License Agreement
annexed to the GTIS Master PC Agreement as Exhibit A.
2. This Second Amendment shall become effective on the date WII
closes the acquisition of AGC pursuant to the Stock Purchase Agreement
(the "Effective Date"). WMS will give GTIS prompt written notice of such
closing. If such acquisition does not close by June 30, 1996, this Second
Amendment shall be null and void and of no force and effect. The capitalized
terms used in this paragraph are defined in paragraph 3 of this Second
Amendment. GTIS' rights, if any, under the GTIS Master PC Agreement and form
of Home Computer Software Distribution and License Agreement with respect to
any games acquired pursuant to the Stock Purchase Agreement, and any subsequent
sequels, adaptations or other versions thereof, shall be subject to all third
party rights pursuant to agreements made by the Atari Group existing at the
Effective Date. All such rights, to the extent known by WMS, are set forth on
a schedule to a letter dated the date hereof and signed by WMS and GTIS.
2
<PAGE> 3
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
3. Section 1 of the GTIS Master PC Agreement shall be
amended to add or replace definitions as follows:
1.1(a) "AGC" shall mean Atari Games Corporation, a California
corporation, which is currently a wholly-owned subsidiary of Warner
Communications Inc., and which is to be sold to WII pursuant to the
Stock Purchase Agreement.
1.1(b) "Atari Advance" shall mean the aggregate * Dollars
advance by GTIS to WMS pursuant to the Atari Agreements.
1.1(c) "Atari Agreements" shall mean the Master Option and
License Agreement for Atari PC Games and the Master Option and License
Agreement for Atari Home Video Games entered into by WMS and GTIS
dated March 27, 1996."
1.1(d) "Atari Game" shall mean (i) any game developed or
acquired by or on behalf of AGC or entities which were affiliates of
AGC prior to AGC being acquired by WII pursuant to the Stock Purchase
Agreement, including, without limitation, those games listed on
Schedule 1 to this Second Amendment, and any adaptations
3
<PAGE> 4
of such games for other platforms, and (ii) any game currently in
development or developed subsequent to such acquisition by or on
behalf of AGC or a member of the Atari Group, or developed, in whole
or in substantial part, by any person or persons who were employees of
AGC or a member of the Atari Group as of the closing date of such
acquisition and who are employees of any member of the WMS Group at
the time of such development, and any adaptations of such games for
other platforms. For purposes of this Section, employees shall be
deemed to include independent contractors who work a substantial
portion of their time at the facilities of any member of the WMS
Group.
1.1(e) "Atari Group" shall mean AGC, or any entity, a
majority of whose capital stock is owned, directly or indirectly, by
AGC or with respect to which during the term of this Agreement, AGC,
directly or indirectly, has the legal power, without the consent of
any third party, to direct the acquisition of rights to or
exploitation of Games on Designated Multipurpose Computer Platforms.
1.1(f) "Business Day" shall mean any day other than a
Saturday, Sunday or Federal holiday.
4
<PAGE> 5
1.2(a) "Early Termination Event" shall mean AGC ceasing to
be at least 50.1% owned by a member of the WMS Group, or the Atari
Group transferring a majority of its intellectual property assets and
licenses to a person or entity who is not a member of the WMS Group.
1.4 "Game" shall mean any coin-operated video game
(including kits), any home video game and any on-line game, released
or intended to be released, by any member of the WMS Group for sale in
commercial quantities in the normal course of business; provided,
however, that Game shall not include any Atari Game. Home video games
shall include games designed for play on dedicated home systems, such
as those marketed by Nintendo, Sega, Atari, Sony, etc. as well as on
multipurpose home computers, such as those marketed by IBM and Apple.
1.7(a) "Milestones" shall mean the defined tasks in the
process of the development of a Technically Acceptable Master Disk as
are deemed sufficiently important such that the achievement of such
tasks will entitle the developer to receive a payment, the amount of
such payment, the standards for approval which will entitle that
developer to
5
<PAGE> 6
receive such payment and the circumstances under which the development
arrangement may be terminated prior to completion.
1.9(a) "PC Option Expiration Date" shall have the meaning
ascribed in Section 2.1 hereof.
1.9(b) "PC Extended Expiration Date" shall have the meaning
ascribed in Section 2.1 hereof.
1.9(c) "Pirate" shall mean an individual or entity which
counterfeits a game or sells counterfeit games.
1.10(a) "Stock Purchase Agreement" shall mean the Stock
Purchase Agreement dated February 23, 1996, between Warner
Communications Inc. and WII pursuant to which Warner Communications
Inc. has agreed to sell and WII has agreed to purchase all of the
outstanding stock of AGC.
1.11(a) "WII" shall mean Williams Interactive Inc., a
wholly-owned subsidiary of WMS.
4. The GTIS Master PC Agreement shall be amended to add at the
end of Section 2.1 thereof, the following:
If the Atari Advance has not been fully recouped by the
expiration date (determined after giving effect to all Extension
Events) of GTIS' first option to acquire licenses
6
<PAGE> 7
under this Section 2.1 (the "PC Option Expiration Date"), such
expiration date shall be extended to a date which is the earlier to
occur of (i) two years from the PC Option Expiration Date, or (ii) the
date on which the Atari Advance is fully recouped. Such new
expiration date is hereafter referred to as the "PC Extended
Expiration Date." In determining whether the Atari Advance has been
fully recouped for all purposes under this Agreement, amounts owed by
GTIS but not yet reported, paid or credited to the Licensor shall be
deemed recouped by GTIS. The expiration date may be further extended
under the following circumstances. If (a) an Early Termination Event
occurs more than one year prior to the PC Extended Expiration Date,
and (b) GTIS shall not have fully recouped the Atari Advance by the PC
Extended Expiration Date (as such date may be extended from time to
time by future amendments or extensions of GTIS' first option other
than by reason of this sentence), then the expiration date shall be
further extended to a date which is the earlier to occur of (x) the
date on which the Atari Advance is fully recouped or (y) the date, to
the nearest calendar quarter end, determined by adding to the PC
Option Expiration
7
<PAGE> 8
Date the number of days between the date of the Early Termination
Event and the PC Option Expiration Date.
5. Section 2.7 of the GTIS Master PC Agreement shall be amended
as follows:
5.1. Section 2.7.1 shall be amended by adding the
following to the first sentence "; provided, that this Section 2.7.1 shall not
apply to Accepted Games as to which GTIS has exercised its rights of review and
approval under Section 2.11 hereof."
5.2. Section 2.7.2 shall be amended by adding the
following to the first sentence "; provided that this Section 2.7.2 shall not
apply to Accepted Games as to which GTIS has exercised its rights of review and
approval under Section 2.11 hereof."
5.3. Former Section 2.7.3 shall be renumbered as "2.7.4"
and any references within that Section and in the GTIS Master PC Agreement to
Section 2.7.3 shall be deemed as amended to read "Section 2.7.4." A new
sentence shall be added after the first sentence of new Section 2.7.4 which
shall read as follows: "If GTIS fails to respond in writing to WMS' notice
within ten (10) Business Days after receipt thereof by GTIS, GTIS shall be
deemed to have consented to WMS' election to terminate development."
5.4. A new Section 2.7.3 shall be added which shall read as
follows:
"2.7.3. Subject to the provisions of 2.11 hereof,
GTIS
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
shall bear 50% of the actual costs of development of any Section 2.4 Game or
Section 2.5 Game as to which GTIS has exercised its rights of review and
approval under Section 2.11."
6. The GTIS Master PC Agreement shall be amended to add a new
Section 2.11 which shall read as follows:
Anything in Sections 2.4 or 2.5 to the contrary
notwithstanding, in the event that after March 31, 1996 the WMS Group
desires to hire a third party developer to develop a Technically
Acceptable Master Disk for an Accepted Game, GTIS shall have the right
to review and approve (such approval not to be unreasonably withheld)
the proposed Milestones prior to the WMS Group entering into a binding
agreement with such developer (such right of review and approval shall
not extend to any terms of the developer agreement other than the
Milestones). The WMS Group shall notify GTIS in writing of its
intention to hire such third party developer and GTIS shall notify WMS
in writing within five (5) Business Days after receipt of the WMS
Group notice that GTIS desires to exercise its right of review and
approval of Milestones. GTIS' failure to timely notify WMS shall be
deemed its election not to
9
<PAGE> 10
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
exercise such right of review and approval. If GTIS shall exercise
such right, GTIS and WMS shall negotiate in good faith to reach
agreement with respect to the proposed Milestones as promptly as
practicable. If such agreement is not reached within ten (10)
Business Days after receipt by WMS of GTIS' aforesaid notice, then WMS
may notify GTIS of Milestones which are acceptable to WMS and GTIS
shall have three (3) Business Days after receipt of such notice to
accept such Milestones. If GTIS does not accept such Milestones
within such three (3) Business Day period, WMS may proceed to enter
into an agreement with such developer as if GTIS had elected not to
exercise its right of review and approval. If a developer agreement
is signed following acceptance by GTIS of the Milestones as aforesaid,
upon approval by GTIS and WMS of the material delivered or other
requirements of each of such Milestones, GTIS shall pay to WMS * of
the Milestone payment within five (5) Business Days after GTIS
receives WMS' invoice therefor. Such payment shall be credited
against the obligations of GTIS to pay WMS * of the actual costs of
code development simultaneously with the receipt
10
<PAGE> 11
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
of a Technically Acceptable Master Disk set forth in Sections 2.4 and
2.5. With respect to any Technically Acceptable Master Disk for
which GTIS is obligated to fund * of the Milestone payments, if WMS
exercises its rights in Section 2.7.4 to terminate development, the
following shall apply: (i) if GTIS consents to such termination,
neither WMS nor GTIS shall be entitled to any reimbursement of the
Milestone payments previously made by the other, or (ii) if GTIS
withholds its consent to such termination, if permitted by the
developer agreement, GTIS may take over the responsibility for
development of a Technically Acceptable Master Disk with the developer
and fund the balance of the development costs. Upon receipt by WMS of
a notice from GTIS that GTIS has received a Technically Acceptable
Master Disk with respect to the Game, WMS shall pay to GTIS, the
amount, if any, by which * of the original development budget approved
by WMS exceeds the Milestone payments previously made by WMS. If GTIS
has fully funded its obligations to make Milestone payments
theretofore due, GTIS may elect to terminate its obligations to make
Milestone payments with
11
<PAGE> 12
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
respect to future Milestones on which the developer has not yet
commenced work; provided that GTIS may not so elect unless the
agreement with the developer permits WMS to terminate its obligations
to the developer by making payments only for Milestones previously
achieved or in work or GTIS agrees to pay * of any actual costs of
terminating the developer agreement. If GTIS properly elects to
terminate its obligation to make Milestone payments, (i) if WMS agrees
to such termination and also terminates the developer agreement,
neither WMS nor GTIS shall be entitled to any reimbursement of the
Milestone payments previously made by the other, or (ii) if WMS elects
to continue development of the Technically Acceptable Master Disk,
GTIS shall be entitled to reimbursement of the Milestone payments
previously made by it upon completion by WMS of the Technically
Acceptable Master Disk, but GTIS shall be deemed to have waived any
future rights to distribute or license the version of the Game
embodied in the Technically Acceptable Master Disk. GTIS shall hold
WMS harmless for any claims by developers against the WMS Group by
reason of
12
<PAGE> 13
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
GTIS' failures to make timely Milestone payments as required
under this Section. WMS shall use all reasonable efforts to cause
agreements with developers entered into after March 31, 1996 which
relate to Technically Acceptable Master Disks for which GTIS is making
* of the Milestone payments to provide for GTIS to have the right to
assume the rights and obligations under that agreement should WMS
elect to terminate the agreement and GTIS elect to continue it. If
both WMS and GTIS elect to terminate a developer agreement and any
proceeds are subsequently generated from the abandoned project, the
proceeds shall be shared by WMS and GTIS in proportion to their
Milestone payments made with respect to such abandoned project. All
ownership and rights in software, artwork, literary text, designs and
other works, and all intellectual property relating thereto, which
would have vested in a member of the WMS Group but for such
termination shall vest in such member of the WMS Group, not GTIS, even
if GTIS assumes the developer agreement, and the WMS Group shall
remain entitled to all of the benefits of the representations and
warranties,
13
<PAGE> 14
indemnifications, confidentiality provisions, restrictions,
covenants and other obligations of the developer which would survive
termination of such agreement. The provisions of this Section 2.11 are
in all cases subject to the provisions of Section 2.12. For developer
agreements in respect of which GTIS has agreed to make Milestone
payments, the WMS Group shall provide GTIS a copy of the final version
of the developer agreement within ten (10) Business Days after the
same is signed; provided, however, that the WMS Group shall have the
right to redact any information in that agreement relating to third
parties which does not affect GTIS' rights or obligations.
7. The GTIS Master PC Agreement shall be amended to add a new
Section 2.12 which shall read as follows:
2.12 If permitted under existing agreements with third
parties, WMS agrees to submit its choice of third party developers to
be selected under Sections 2.4 and 2.5 of this Agreement to GTIS for
GTIS' approval, such approval not to be unreasonably withheld, and,
GTIS shall notify WMS of its decision with respect to such developer
within five (5) Business Days after receipt by GTIS of WMS' notice.
If the Technically Acceptable Master Disk
14
<PAGE> 15
being developed is based upon a coin-operated Game which has been
released within the 24 month period preceding WMS' request for GTIS'
approval of the developer, or is released after such request for
approval but prior to the release of the home version of such Game,
WMS shall have the final decision in selecting the developer if a
representative of WMS' coin-operated game development group advises
GTIS in writing that the selection of a particular developer is
important to such group. In all other circumstances, if GTIS
reasonably disapproves of the developer suggested by WMS, that
developer shall not be used and a new developer shall be selected by
WMS subject to GTIS' right of approval as provided above in this
Section 2.12.
8. The GTIS Master PC Agreement shall be amended to add a new
Section 2.13 which shall read as follows:
Royalties payable to WMS pursuant to Schedule B of the Home
Computer Software Distribution and License Agreement are measured by
the wholesale prices of Licensed Product. Accordingly, reasonably in
advance of WMS' decision to enter into a developer contract and
reasonably in advance of GTIS' initial release of the
15
<PAGE> 16
Licensed Product, GTIS shall advise WMS, at WMS' request, of GTIS'
expected pricing strategy and the reasons therefor. Nothing herein
shall be deemed to restrict GTIS' freedom in selecting wholesale sales
prices it considers appropriate, which shall be in GTIS' sole
discretion.
9. The GTIS Master PC Agreement shall be amended to add a new
Section 2.14 which shall read as follows:
If, under Section 2.1 of any Home Computer Software
Distribution and License Agreement entered into under this Agreement,
Licensor has granted written approval (which shall not be unreasonably
withheld) to Licensee of a specific sublicensee for the Licensed
Property, such approval shall apply to the sublicensing by that
sublicensee of all Licensed Properties licensed to Licensee under Home
Computer Software Distribution and License Agreements entered into
under this Agreement, subject to the following: (i) the sublicense
agreements shall contain provisions with respect to quality of
Licensed Product, trademarks, copyrights, materials, other
intellectual property rights, rights of additional sublicensing or
assignment, termination rights, confidentiality, accounting, auditing,
reporting and payment procedures in
16
<PAGE> 17
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
form agreed to by GTIS and WMS, and the form as so agreed to may be
used by all approved sublicensees described in clause (iii) below;
provided that if such form is not so used, any other form to be used
shall be subject to prior approval as provided in this subsection (i);
(ii) no such blanket approval shall be deemed given with respect to
Licensed Properties as to which approval requirements imposed by third
parties, such as the NFL and NBA, apply, (iii) if the sublicense is
for a Marketing Area other than those designated as Key Marketing
Areas in such Home Computer Software Distribution and License
Agreement and if the expected sales volume in such Marketing Area, in
GTIS' good faith judgment, is an average of * units or less per SKU
per year, Licensee will not be required to obtain Licensor's prior
written approval of the terms of such license but Licensee will be
required to provide a copy of each sublicense to Licensor within ten
(10) Business Days after GTIS enters into such sublicense; and (iv) if
the Marketing Area is designated as a Key Marketing Area or if, in
GTIS' good faith judgment, the expected sales volume for such
Marketing Area is more
17
<PAGE> 18
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
than an average of * units per SKU per year, Licensee will be
required to obtain Licensor's prior written approval, which Licensor
will not unreasonably withhold, of the terms of a sublicense for such
Marketing Area even if the identity of the sublicensee has been
previously approved; provided, however, if a sublicense is for
multiple platforms and multiple games, the approval of the sublicense
will be deemed to be approval for all Games distributed under that
sublicense (subject to clause (ii)). Anything to the contrary
notwithstanding, (x) if a previously approved sublicensee becomes an
Exporter (as such term is defined in Exhibit A to the GTIS Master
Option and License Agreement (Home Video) dated March 31, 1995) or a
Pirate, Licensee will immediately upon becoming aware thereof notify
Licensor of the identity of such Exporter or Pirate and as soon as
practicable terminate the sublicense upon request by Licensor, and (y)
Licensor and Licensee will review every two years the identity of
sublicensees, and those sublicensees who previously received blanket
approval as provided in the first sentence of this Section and who are
no longer considered acceptable by Licensor, in the
18
<PAGE> 19
exercise of Licensor's reasonable judgment, will no longer have
such blanket approval and will be subject to Licensor's prior approval
with respect to all future sublicenses in accordance with the approval
procedures set forth above. Licensee shall use all reasonable efforts
to cause each agreement with its sublicensees to permit Licensee to
terminate such agreement immediately if such sublicensee shall be or
become an Exporter or a Pirate.
10. Section 7 of the GTIS Master PC Agreement shall be amended
to add at the end thereof, the following:
With respect to this Agreement and all Home Computer Software
Distribution and License Agreements entered into in connection
herewith, each of WMS Group and GTIS agree to use reasonable efforts
to ensure that either of them may disclose the proprietary information
of the other (including, without limitation, the software source code
and tools relating to any Game), only to those persons within their
organizations who have a need to know such information in order to
perform its obligations under this Agreement and the Home Computer
Software Distribution and License Agreements and any such disclosure
shall be limited to the information which needs to be known.
19
<PAGE> 20
Further, neither the WMS Group nor GTIS shall use any such proprietary
information for purposes other than the performance of its obligations
under this Agreement and the Home Computer Software Distribution and
License Agreements.
11. Paragraph 5 of the First Amendment shall be amended
to provide that Section 10.1 of the GTIS Master PC Agreement shall be amended
to delete the parenthetical language "(including its sublicenses and affiliates
as one party)" in the last sentence of such Section and by replacing the words
"as long as that party remains fully liable for its obligations hereunder" at
the end of the second sentence of such Section 10.1 with the words "as long as
both the assignee and the assignor remain fully liable for assignor's
obligations hereunder."
12. For purposes of the last paragraph of Paragraph 13 of
the First Amendment (i) distribution of a coin-operated video or pinball game
by any member of the Atari Group or a former affiliate of any member of the
Atari Group shall be deemed distribution by Licensor or its affiliates; and
(ii) all references to "Licensor or any of its affiliates" shall be amended to
read, "Licensor or any entity which at any time was or is an affiliate of any
member of the WMS Group or the Atari Group." The following shall be added
immediately preceding such last paragraph:
Anything in the foregoing paragraphs to the contrary
notwithstanding, where the Licensed Property has not been embodied in a
coin-operated video or pinball
20
<PAGE> 21
THIS INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
game, whether distributed by Licensor or any entity which at any time
was an affiliate of any member of the WMS Group or the Atari Group,
Licensee may elect to pay an alternative royalty therefor. The
alternative royalty shall equal the sum of the royalty percentage
payable in accordance with the table set forth in Schedule B plus the
Licensee's share of Third Party Fees and Royalties, but in no event
shall the alternative royalty exceed * of the actual Net Wholesale
Sales Price of the Licensed Product; provided, however, that anything
in the foregoing paragraphs or this paragraph to the contrary
notwithstanding, under no circumstances shall royalties, whether
regular royalties, Substitute Royalties or alternative royalties, be
less than * of the Third Party Fees and Royalties payable with respect
to the sale of Licensed Products.
12.1. Section 1 of the Home Computer Software Distribution
and License Agreement shall be amended by adding at the end thereof, the
following:
Capitalized terms used, but not defined herein, shall have the
meaning ascribed to such terms in the GTIS Master Agreement.
21
<PAGE> 22
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
12.2. Section 3.2 of the Home Computer Software
Distribution and License Agreement shall be amended to add as the first clause
thereof, the following:
After the end of the Japan Territory Period, as defined in
the letter between WMS and GTIS dated March 27, 1996, captioned
"Japan Territory,"
13. Schedule B to the Home Computer Software Distribution and
License Agreement shall be amended as follows:
13.1. Paragraph 2 under the heading "Adjustment to
Royalties" shall be amended by adding at the end thereof, the following which
shall be deemed a clarification of the practice currently being followed by
Licensee and Licensor:
In cases where Licensed Products are bundled, net proceeds
from bundling shall be treated in the same manner as net proceeds from
sublicensees; provided, however, that if Licensee is also the
manufacturer of products for bundling, the fee to Licensee shall equal
* rather than * of net proceeds.
13.2. A new Paragraph 4 shall be added after paragraph 3
under the heading "Adjustment to Royalties" which shall read as follows:
4. For purposes of Paragraphs 1 and 2 above, the fees,
royalties or other participations referred to in clause 3 of Section
1.9 shall not be excluded in determining
22
<PAGE> 23
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
"Third Parties Fees and Royalties." For avoidance of doubt,
advances payable to developers shall continue to be excluded.
13.3. The paragraph under the heading "Recoupment"
shall be amended to replace the word "paid" on the first line of such paragraph
by the words "applied or accrued" and to insert the words "applied or accrued
by Licensee" between the words "Recoupable Amounts" and "under" on line 6 of
such paragraph.
13.4. A new paragraph shall be added at the end of
the paragraph under the heading "Recoupment" which shall read as follows:
"If the Atari Advance has not been fully recouped by GTIS on
the date on which the total of recoupable amounts under this Agreement
and other Home Computer Software Distribution and License Agreements
entered into pursuant to the GTIS Master Agreement equals the * Dollars
Option and Advance Fee and Guaranty paid by the Licensee under the GTIS
Master Agreement, then royalties otherwise payable under this Agreement
shall be recoupable against the Atari Advance in the manner set forth
in this Schedule B until the Atari Advance shall be fully recouped. In
determining whether the Atari Advance has been fully recouped, amounts
owed by GTIS but not yet reported,
23
<PAGE> 24
paid or credited to the Licensor shall be deemed recouped by GTIS. If
in respect of any royalty payment period royalties are available for
recoupment of the Atari Advance under any one or more of the
distribution and license agreements entered into under the Atari
Agreements, the GTIS Master Agreement and the GTIS Master Option and
License Agreement (Home Video Games) dated March 31, 1995, (the "GTIS
Master Home Video Agreement"), the Atari Advance shall be recouped
from royalties in the following order: (i) royalties payable under
distribution and license agreements entered into under the Atari
Agreements; (ii) royalties payable under distribution and license
agreements entered into under the GTIS Master Agreement; and (iii)
royalties payable under distribution and license agreements entered
into under the GTIS Master Home Video Agreement.
14. WMS hereby confirms to GTIS that it is WMS' present
intention that it will maintain a separate Atari Group games design
organization and that any member of the design teams working for that
organization will work solely on the creation of Atari Games. WMS further
confirms that it will use all reasonable effort to maintain such separate
organization.
15. In the event of conflicts between the provisions of the GTIS
Master
24
<PAGE> 25
Agreement and the Home Computer Software Distribution and License Agreement,
the provisions of the GTIS Master Agreement shall prevail.
25
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Second
Amendment as of the day and year first above written.
WMS INDUSTRIES INC
By: /s/ Neil D. Nicastro
--------------------------------------
WILLIAMS ELECTRONICS GAMES, INC.
By: /s/ Neil D. Nicastro
--------------------------------------
MIDWAY MANUFACTURING COMPANY
By: /s/ Neil D. Nicastro
--------------------------------------
WILLIAMS ENTERTAINMENT INC.
By: /s/ Byron Cook
--------------------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
--------------------------------------
26
<PAGE> 27
SCHEDULE I
ATARI LIBRARY
(Not Including Projects in Process)
RELEASED COIN-OP TITLES
DATE PRODUCT
Nov - 72 Pong
Jul - 83 Space Race
Sep - 73 Pong Doubles
Oct - 73 Gotcha Color
Oct - 73 Gotcha
Oct - 73 Elimination (KEE)
Feb - 74 Super Pong
Feb - 74 Rebound
Mar - 74 Spike (KEE)
Mar - 74 Quadrapong
Mar - 74 Gran Trak 10
Apr - 74 Formula K (KEE)
Apr - 74 World Cup
Apr - 74 World Cup CKT
Jun - 74 Touch Me
Jul - 74 Twin Racer (KEE)
Jul - 74 Trak 10
Aug - 74 Gran Trak 20
Aug - 74 Puppy Pong
Aug - 74 Trak 20
Sep - 74 Dr. Pong
Oct - 74 Pin Pong
Nov - 74 Tank
Nov - 74 Qwak
Jan - 75 Dodgeball
Jan - 75 Pursuit
Apr - 75 Indy 800
Apr - 75 Highway
May - 75 Crossfire (KEE)
May - 75 Tank II (KEE)
Jun - 75 Anti Aircraft
Jun - 75 Anti Aircraft
<PAGE> 28
Jul - 75 Goal IV
Sep - 75 Jaws
Oct - 75 Steeplechase
Oct - 75 Crash N Score
Oct - 75 Jet Fighter
Dec - 75 Jet Fighter CKT
Jan - 76 Stunt Cycle
Mar - 76 Outlaw
Apr - 76 Tank 8 (KEE)
Apr - 76 Quiz Show (KEE)
Apr - 76 Breakout
May - 76 Indy 4
Jul - 76 Breakout CKT
Jul - 76 Cops N Robbers
Jul - 76 Fly Ball (KEE)
Aug - 76 Lemans
Oct - 76 Night Driver
Nov - 76 Sprint II (KEE)
Nov - 76 F-I
Nov - 76 The Atarians Pin
Jan - 77 Dominos
Feb - 77 Dominos CKT
Apr - 77 Triple Hunt
Apr - 77 Triple Hunt Single
Apr - 77 Night Driver SD
May - 77 Sprint 8 (KEE)
Jun - 77 Time 2000 Pin
Jun - 77 Pool Shark
Jun - 77 Drag Race (KEE)
Jul - 77 Starship
Sep - 77 Super Bug (KEE)
Sep - 77 Two Game Module
Sep - 77 Airborne Aveneger Pin
Oct - 77 Destroyer
Nov - 77 Canyon Bomber
Dec - 77 Sprint 4
Jan - 78 Sprint 1
Feb - 78 Middle Earth Pin
Mar - 78 Sky Raider
Mar - 78 Tournament Table
Apr - 78 Avalanche
Jun - 78 Fire Truck
Jun - 78 Sky Diver
<PAGE> 29
Jul - 78 Smokey Joe
Sep - 78 Super Breakout
Sep - 78 Space Rider Pin
Oct - 78 Atari Football
Nov - 78 Orbit
Feb - 79 Video Pinball
Mar - 79 Superman Pin
Apr - 79 Hercules Pin
May - 79 Basketball
May - 79 Subs
Jun - 79 Baseball
Aug - 79 Lunar Lander
Apr - 79 4PL Atari Football
Nov - 79 Asteroids
Apr - 80 Asteroids CKT
Apr - 80 Soccer
Apr - 80 Monte Carlo
Jun - 80 Asteroids Cabaret
Jun - 80 Missle Command
Aug - 80 Missle Command CKT
Sep - 80 Missle Command Cabaret
Sep - 80 Missle Command SD
Nov - 80 Battle Zone
Dec - 80 Battle Zone Cabaret
Apr - 81 Asterids Deluxe Cabaret
Apr - 81 Warlords CKT
May - 81 Asteroids Deluxe
May - 81 Asteroids Deluxe CKT
May - 81 Red Baron SD
Jun - 81 Centipede
Jun - 81 Red Baron
Jun - 81 Battle Zone Open Face
Jul - 81 Centipede CKT 13"
Jul - 81 Centipede CAB
Sep - 81 Centipede CKT 19"
Oct - 81 Tempest
Dec - 81 Tempest CKT
Dec - 81 Tempest Cabaret
Feb - 82 Space Duel
Apr - 82 Dig Dug
Apr - 82 Space Duel CKT
Jun - 82 Kangaroo
Jun - 82 Dig Dug CKT
<PAGE> 30
Jun - 82 Dig Dug CAB
Jun - 82 Gravitar
Nov - 82 Milipede
Nov - 82 Liberator
Nov - 82 Quantum
Nov - 82 Pole Position
Nov - 82 Pole Position SD
Feb - 83 Xevious
Feb - 83 Black widow
Feb - 83 Milipede CKT
Mar - 83 Food Fight
May - 83 Arabian
May - 83 Star Wars
May - 83 Star Wars SD
May - 83 Food Fight CKT
Jul - 83 Crystal Castles
Nov - 83 Major Havoc
Nov - 83 Pole Position II
Nov - 83 Crystal Castles CKT
Jan - 84 Firefox
Feb - 84 Firefox SD
Mar - 84 TX-1 SD
Jun - 84 I, Robot
Sep - 84 Return of the Jedi
Dec - 84 Marble Madness SYS 1
Mar - 85 Empire Kit
Apr - 85 Paperboy SYS 2
Jul - 85 Pack Rat SYS 1
Jul - 85 Pack Rat SYS (KIT)
Jul - 85 Temple of Doom SYS 1
Jul - 85 Temple of Doom Kit
Oct - 85 Gauntlet
Apr - 86 Super Sprint
May - 86 Guantlet 2 Player
Jul - 86 Road Runner SYS 1
Jul - 86 Road Runner Kit
Aug - 86 Gauntlet II
Aug - 86 Gauntlet II 4 player kit
Aug - 86 Gauntlet II 2 player kit
Sep - 86 Champ Sprint SYS 2
Sep - 86 Champ Sprint Kit
Dec - 86 720
Feb - 87 Rolling Thunder
Mar - 87 Road Blaster SYS 1
<PAGE> 31
Mar - 87 Road Blaster Kit
Mar - 87 Road Blaster SD
May - 87 Dunk Shot
Jul - 87 A.P.B.
Jul - 87 Dragon Shot
Sep - 87 RBI Baseball Kit
Nov - 87 Xybots
Dec - 87 Pacmania
Feb - 88 Blasteroids
Apr - 88 Galaga '88
Apr - 88 Galaga '88 Kit
Apr - 88 Vindicators
May - 88 Pot Shot
May - 88 Final Lap SD
Jun - 88 Toobin
Aug - 88 Assault
Sep - 88 Cyberball
Oct - 88 Final Lap UR
Feb - 89 Tetris Kit
Feb - 89 Hard Drivin SD
Feb - 89 Splatterhous PCB
Feb - 89 Vindicator Kits
Jun - 89 Hard Drivin Compact
Jun - 89 Escape
Jun - 89 Escape Kit
Aug - 89 Cyberball 2072 4 player
Sep - 89 Cyberball 2072 2 player
Sep - 89 Stunrunner
Oct - 89 Cyberball 2072 Conv. Kit
Nov - 89 Cyberball 2 PL Univ. Kit
Nov - 89 Skull & Crossbones
Nov - 89 Skull & Crossbones Kit
Dec - 89 4 Trax Moving
Jan - 90 Badlands
Jan - 90 Badlands Kit
Jan - 90 Cyberball vs. Kit
Feb - 90 Klax
Feb - 90 Klax Kits (Incl. Japan)
Apr - 90 4 Trax Stationary
Jun - 90 Gumball Rally
Jun - 90 Hydra
Jun - 90 Hydra Kits
Jul - 90 ThunderJaws Kits
<PAGE> 32
Aug - 90 Pitfighter
Aug - 90 Race Drivin SD
Oct - 90 Race Drivin SD Conv.Kits
Nov - 90 Tetris Cabaret
Nov - 90 Shuuz
Nov - 90 Shuuz Kits
Dec - 90 Race Drivin Compact
Feb - 91 Rampart
Mar - 91 Pitfighter 2 PL Kits
Apr - 91 Batman Kits
Apr - 91 Rampart Kits Incl. Japan
Apr - 91 Race Drivin Intl. Kits
May - 91 Race Drivin Panaorama
Jun - 91 Road Riot
Sep - 91 Steel Talons
Oct - 91 Off the Wall Kit
Apr - 92 Relief Pitcher Game
May - 92 Relief Pitcher Kit
Jun - 92 Guardians of the Hood
Jul - 92 Moto Frenzy Deluxe
Jul - 92 Guardians of the Hood Kit
Sep - 92 Moto Frenzy Mini
Nov - 92 Space Lords
Mar - 93 Knuckle Bash Kit
Jun - 93 World Rally Kits
Oct - 93 Showcase '33
Jul - 94 T-MEK
Aug - 94 Primal Rage Showcase 33
Sep - 94 Primal Rage Family Cabinet
Oct - 94 Cops
Sep - 95 Hoop It Up
Nov - 95 Area 51 33" Showcase
Nov - 95 Area 51 25"
<PAGE> 33
RELEASED CONSUMER TITLES
DATE TITLE FORMAT
After Burner NES
Alien Syndrome NES
Fantasy Zone NES
88 Gauntlet NES
Klax NES
Ms. Pacman NES
88 Pacman NES
Pacmania NES
88 RBI Baseball NES
RBI 2 Baseball NES
RBI 3 Baseball NES
Road Runner NES
Rolling Thunder NES
Shinobi NES
Skull & Crossbones NES
Super Sprint NES
May - 89 Tetris NES
Temple of Doom NES
Toobin NES
Vindicators NES
<PAGE> 34
Jun - 95 RBI 95 32X
Oct - 94 Battlecorps Sega CD AFL
Feb - 95 BC Racers Sega CD AFL
Nov - 94 Lawnmowerman Sega CD AFL
Dec - 94 Soulstar Sega CD AFL
Dec - 95 Wayne Gretzky PC CD ROM
Sep - 95 Primal Rage PC CD ROM
Nov - 94 Rise of the Robots PC CD ROM
Nov - 94 Rise of the Robots PC CD ROM
Jun - 95 Striker Europe CD ROM
Nov - 94 Rise of the Robots Europe CD ROM
Sep - 95 Primal Rage Europe CD ROM
Jun - 95 Striker Europe 1Disk
Jun - 95 Rise of the Robots Europe Disk
Jun - 95 Rise of the Robots Amiga-Europe
PGA Tour Golf Europe Game Gear
KLAX Europe Game Gear
Marble Madness Europe Game Gear
Paperboy Europe Game Gear
Popils Europe Game Gear
Dec - 94 PGA Tour II Europe Game Gear
Jun - 95 Rise of the Robots Europe Game Gear
<PAGE> 35
World Cup Soccer Europe Game Gear
Aug - 95 Primal Rage Gameboy
Mar - 95 Kawasaki Superbike Game Gear AFL
Dec - 93 Desert Strike Game Gear AFL
Dec - 93 Formula 1 Game Gear AFL
Prince of Persia Game Gear AFL
Super Space Invaders Game Gear AFL
Mar - 95 Kawasaki Superbike Genesis
Davis Cup Tennis Genesis
Dragon's Fury Genesis
Dick Vitale Genesis
Basketball
Dec - 93 Dragon's Revenge Genesis
Nov - 93 Gauntlet 4 Genesis
Nov - 94 Generations Lost Genesis
Grindstormer Genesis
Hard Driven Genesis
Klax Genesis
Nov - 94 Lawnmowerman Genesis
Ms Pacman Genesis
Paperboy 2 Genesis
Paperboy Genesis
<PAGE> 36
Pitfighter Genesis
Pacmania Genesis
Nov - 93 Awesome Possum Genesis
Prince of Persia Genesis
Dec - 93 Race Drivin Genesis
Aug - 95 Primal Rage Genesis
Rampart Genesis
RBI 93 Genesis
RBI 94 Genesis
RBI 3 Basketball Genesis
RBI 4 Genesis
Road Blasters Genesis
Nov - 94 Red Zone Genesis
Sylvester & Tweety Genesis
Steel Talons Genesis
Jun - 95 Wayne Gretzky Genesis
Bubba N' Stix Genesis
Nov - 93 Formula 1 Genesis AFL
James Bond Genesis AFL
Nov - 94 Marko & His Magic Genesis AFL
Soccer Ball
MIG 29 Genesis AFL
Chuck Rock II Game Gear
<PAGE> 37
Dec - 93 PGA Tour Golf Game Gear
Klax Game Gear
Marble Madness Game Gear
Paperboy 2 Game Gear
Paperboy Game Gear
Nov - 94 PGA Tour II Game Gear
Popils Game Gear
Aug - 95 Primal Rage Game Gear
Nov - 94 RBI 94 Game Gear
Dec - 94 Rise of the Robots Game Gear
World Cup Soccer Game Gear
Oct - 95 Power Drive Rally Jaguar
Dec - 95 Primal Rage Jaguar CD
Davis Cup Tennis Mega Drive-Europe
Dragon's Fury Mega Drive-Europe
Dick Vitale Mega Drive-Europe
Basketball
Dragon's Revenge Mega Drive-Europe
Gauntlet 4 Mega Drive-Europe
Hard Drivin Mega Drive-Europe
Kawasaki Superbike Mega Drive-Europe
Klax Mega Drive-Europe
Lawnmowerman Mega Drive-Europe
<PAGE> 38
Paperboy Mega Drive-Europe
Paperboy 2 Mega Drive-Europe
Pitfighter Mega Drive-Europe
Pacmania Mega Drive-Europe
Rampart Mega Drive-Europe
RBI 94 Mega Drive-Europe
Nov - 94 Red Zone Mega Drive-Europe
Aug - 94 Sylvester & Tweety Mega Drive-Europe
Steel Talons Mega Drive-Europe
Mar - 95 Mega Swiv Mega Drive-Europe
A.C. Adapter Gameboy
A.C. Adapter Genesis
A.C. Adapter SNES
A.C. Adapter Game Gear
Control Pad Genesis
Control Pad NES
Control Pad SNES
Hi-Freq Control Pad Genesis
Hi-Freq Control Pad NES
Hi-Freq Control Pad SNES
Hi-Freq Magnifier Game Gear
<PAGE> 39
Hi-Freq Night Sight Gameboy
Hi-Freq Power Clip Gameboy
w/adaptor
Hi-Freq Power Clip Game Gear
R.F. Switch All
Night Sight Gameboy
Power Clip w/A.C. Gameboy
adaptor
Power Clip Gameboy
Wayne Gretzky Kit Rest of World
Wayne Gretzky Mega Drive-Rest of World
Kawasaki Superbike SNES-Rest of World
Primal Rage Kit Rest of World
Sep - 95 Primal Rage PC CD ROM-Rest of World
Sep - 95 Primal Rage Gameboy-Rest of World
Aug - 95 Primal Rage SNES-Rest of World
Sep - 95 Primal Rage Mega Drive-Rest of World
Jul - 95 Striker Spindle PC CD ROM-Rest of World
Virtua Racing Saturn-Rest of World
Dec - 95 Last Gladiators Saturn
Nov - 95 Virtua Racing Saturn
Sep - 93 Robo Aleste Sega CD
PGA Tour Golf Master System-Europe
<PAGE> 40
Klax Master System-Europe
Ms. Pacman Master System-Europe
Rampart Master System-Europe
Dec - 95 Wayne Gretzky SNES
Dec - 95 Kawasaki Superbike SNES
Aug - 95 Primal Rage SNES
Jun - 95 Super RBI SNES
Blasteroids Computer Software
Rolling Thunder Computer Software
Dec - 95 Primal Rage Sony PSX
Dec - 95 Zero Divide Sony PSX
Klax NEC Turbografix
Return Fire Sony PSX
Constructor Sony PSX
T-MEX Sony PSX
Area 51 Sony PSX
Wayne Gretzky II Sony PSX
Wheels Sony PSX
<PAGE> 41
SCHEDULE 1
PROJECTS IN PROCESS
(ATARI PC GAMES)
TITLE PLATFORM
- ----- --------
Area 51 CD-ROM
Constructor Win '95/Mac-CD
Crisis Win '95
Dark Hermetic Order PC CD-ROM
Gretzky Hockey PC CD-ROM
Gretzky II Win '95
Primal Rage Mac-CD
RBI 96 IBM PC; CD-ROM
Return Fire CD-ROM
T-Mek PC; CD-ROM
<PAGE> 42
SCHEDULE 2
PROJECTS IN PROCESS
(HOME VIDEO GAMES)
TITLE PLATFORM
- ----- --------
Area 51 Saturn; PSX
Constructor PSX
Gretzky II PSX
Gretzky Arcade Ultra 64
Last Gladiators Saturn
Power Drive Jaguar
Primal Rage Saturn; PSX
Return Fire PSX; Saturn
T-Mek PSX
Toonfighter PSX
Virtua Racing Saturn
Wheels (Driver) PSX
Zero Divide PSX
<PAGE> 1
EXHIBIT 10.12
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
GTIS MASTER OPTION AND LICENSE AGREEMENT
(HOME VIDEO GAMES)
This Master Option and License Agreement ("Agreement") is made
and entered into the 31st day of March, 1995, by and among WMS INDUSTRIES INC.
("WMS"), WILLIAMS ELECTRONICS GAMES, INC. ("WEG"); MIDWAY MANUFACTURING COMPANY
("Midway") and WILLIAMS ENTERTAINMENT INC. ("WEI"), each being Delaware
corporations with offices at 3401 North California Avenue, Chicago, Illinois
60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware corporation with
offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, WEG, Midway and WEI are wholly-owned subsidiaries of
WMS engaged in the business of designing, manufacturing and selling
coin-operated amusement games and software products for dedicated home video
game systems and multipurpose home computers; and
WHEREAS, GTIS is engaged in the business of distributing
entertainment software products; and
<PAGE> 2
WHEREAS, GTIS desires to acquire certain rights from WMS, WEG,
Midway, WEI and other affiliates of WMS with respect to Games, as such term is
defined herein, and WEG, Midway, WEI and WMS desire to grant such rights to
GTIS;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. "Accepted Game" shall mean any Game with
respect to which GTIS has received a license or has exercised an option to
acquire a license provided for in Section 2 hereof.
1.2. "Alternative Royalty" shall have the meaning
ascribed in Schedule "B" of the Home Video Game Distribution and License
Agreement.
1.3. "Delivery Date" shall have the meaning
ascribed in Section 2.7 hereof.
1.4. "Designated Consumer Game Platforms" shall
mean any of the Sony(R), Nintendo(R) or Sega(R) dedicated home video game
hardware platforms or other dedicated home video game hardware platforms having
a microprocessor with a 32 bit or higher capacity (excluding SNES and Sega
Genesis), on which Game software can be played utilizing cartridges, CD-ROM
disks or other devices which may hereafter replace or supplement cartridges or
CD-ROM disks in operating systems now known or hereafter developed for use on
dedicated home video game hardware platforms. Designated Consumer Game Platforms
shall not, for purposes of this Agreement, include (a) any of the Atari
Jaguar(R) system, the 3D-O(R) system, or their respective successors (including
any enhancements, improvements or updates), except only to the extent that the
WMS Group shall itself (and not through any licensee or sublicensee) actually
2
<PAGE> 3
release for commercial shipment in the normal course of business any Games on
such hardware platforms in the United States, or (b) any hand held games, or any
multipurpose home or personal computer system or any electronic distribution or
on-line interactive computer game systems or platforms.
1.5. "First Release" or "First Released" shall mean
the date of the first commercial shipment of a Game in the normal course of
business (and not merely for test purposes).
1.6. "Full Price" shall have the meaning ascribed
in Section 2.1 hereof.
1.7. "Game" shall mean any home video game designed
for play on a specific Designated Consumer Game Platform which has been released
for commercial shipment in the normal course of business by any member of the
WMS Group or by any licensee of the WMS Group on such Designated Consumer Game
Platform for sale in commercial quantities in the United States in the normal
course of business, but excluding any such home video game with respect to which
the WMS Group shall, prior to the date hereof, have granted rights (or any
option, right of first refusal or negotiation or other ability to obtain rights
which may be subsequently exercised) to any third party, including without
limitation any sublicensee of the WMS Group, to manufacture, distribute or sell
such home video game on such specific Designated Consumer Game Platform within
the Licensed Territory, including any renewals or extensions thereof resulting
from the exercise of previously granted rights. Set forth on Schedule 1 annexed
hereto is a list of all material agreements pursuant to which the WMS Group has,
prior to the date hereof, granted rights to manufacture, distribute and sell
such home video games on Designated Consumer Game Platforms within the Licensed
Territory, but excluding
3
<PAGE> 4
any agreements pursuant to which the WMS Group has granted rights to home video
games based on games which have heretofore been released for commercial shipment
in the normal course of business by the WMS Group or by any sublicensee of the
WMS Group as coin-operated video or pinball games or on any dedicated home video
game platform or agreements pursuant to which the WMS Group has granted rights
to any derivative or sequel to any such previously released coin-operated video,
pinball or home video game. A home video game shall be deemed a separate Game
with reference to the specific Designated Consumer Game Platform on which it has
been designed for play.
1.8. "GTIS" shall mean GTIS or any affiliate of
GTIS to whom any rights to exploit any Games granted hereunder may be
sublicensed. An affiliate of GTIS shall refer to an entity, a majority of whose
capital stock is owned directly or indirectly by GTIS or with respect to which
during the term of this Agreement, GTIS, directly or indirectly, has the legal
power without the consent of any third party to direct the manufacture,
distribution or sale of Games.
1.9. "Guaranteed Advance Royalty" shall have the
meaning ascribed in Section 3 hereof.
1.10. "Home Video Game Distribution and License
Agreement" shall mean an agreement for the license of an Accepted Game for use
solely on a specific Designated Consumer Game Platform in the form of Exhibit A
annexed hereto, as the same may be amended from time to time by written
agreement of the parties thereto.
1.11. "Initial Option Period" shall mean the period
commencing on the date hereof and ending on June 30, 2001.
4
<PAGE> 5
1.12. "IPO" shall have the meaning ascribed in
Section 3 hereof.
1.13. "Licensed Territory" shall have the meaning
ascribed in Section 3.1 of the Home Video Game Distribution and License
Agreement.
1.14. "Marketing Area" shall have the meaning
ascribed in Section 3.3 of the Home Video Game Distribution and License
Agreement.
1.15. "Master Disk" shall mean a CD-ROM disk or
floppy disk containing the source code utilized by the WMS Group for an Accepted
Game released or intended to be released in the United States.
1.16. "Minimum Guaranteed Royalty" shall have the
meaning ascribed in Section 3 hereof.
1.17. "Minimum Royalty Shortfall Amount" shall have
the meaning ascribed in Section 2.1 hereof.
1.18. "New Game Acceptance Notice" shall have the
meaning ascribed in Section 2.3 hereof.
1.19. "New Game Option Notice" shall have the
meaning ascribed in Section 2.3 hereof.
1.20. "New Game Option Notice Date" shall have the
meaning ascribed in Section 2.3 hereof.
1.21. "North America" shall mean (a) the United
States of America, its territories, possessions, and United States military
installations worldwide, (b) Canada and (c) Mexico.
5
<PAGE> 6
1.22. "Notice of Election" shall have the meaning
ascribed in Section 10 hereof.
1.23. "Option Period Termination Notice" shall have
the meaning ascribed in Section 2.1 hereof.
1.24. "Proposed Game" shall have the meaning
ascribed in Section 2.3 hereof.
1.25. "Renewal Option Period" shall have the meaning
ascribed in Section 2.1 hereof.
1.26. "Renewal Option Year" shall have the meaning
ascribed in Section 2.1 hereof.
1.27. "Renewal Threshold Amount" shall have the
meaning ascribed in Section 2.1 hereof.
1.28. "WMS Group" shall mean WMS, WEG, Midway and
WEI, or any subsidiary, affiliate or other entity, a majority of whose capital
stock is owned directly or indirectly by WMS, WEG, Midway or WEI or with respect
to which during the term of this Agreement, WMS, directly or indirectly, has the
legal power, without the consent of any third party, to direct the acquisition
of rights to or exploitation of Games on Designated Consumer Game Platforms.
1.29. "Weighted Average Gross Profits" shall have
the meaning ascribed in Schedule "B" of the Home Video Game Distribution and
License Agreement.
1.30. "Test Period" shall have the meaning ascribed
in Section 10 hereof.
6
<PAGE> 7
2. GRANT AND TERMINATION OF OPTION; EXERCISE OF OPTION;
RENEWAL OPTION PERIOD.
2.1. The WMS Group hereby grants to GTIS a first
option to acquire a license, in the form of the Home Video Game Distribution and
License Agreement, to manufacture, distribute, sell, sublicense and
subdistribute versions of the Games for use solely on specific Designated
Consumer Game Platforms, with respect to Games which become Accepted Games
during the Initial Option Period or Renewal Option Period, provided that such
Games are actually released by the WMS Group or its licensees in the United
States within twelve (12) months following the expiration of the Initial Option
Period or any Renewal Option Period. The Initial Option Period shall be deemed
extended annually for up to an additional five (5) years (the "Renewal Option
Period"), provided that GTIS shall not, as of the expiration of the Initial
Option Period, be in default in respect of any of its material obligations under
this Agreement, including, without limitation, its obligation in respect of the
payment of any Minimum Guaranteed Royalty then due, and provided further that
(a) gross unit sales of Accepted Games by GTIS and its sublicensees in the
Licensed Territory under all Home Video Game Distribution and License Agreements
which were entered into pursuant to this Agreement during the Initial Option
Period shall at least equal the Renewal Threshold Amount for such Initial Option
Period and (b) the gross unit sales of Accepted Games by GTIS and its
sublicensees under all Home Video Game Distribution and License Agreements
entered into pursuant to this Agreement for each year during the Renewal Option
Period (a "Renewal Option Year") shall at least equal the Renewal Threshold
Amount for such Renewal Option Year. If the gross unit sales of Accepted Games
by GTIS and its sublicensees in the Licensed Territory
7
<PAGE> 8
under all Home Video Game Distribution and License Agreements entered into
during the Initial Option Period shall not at least equal the Renewal Threshold
Amount for the Initial Option Period, then the Initial Option Period shall not
be deemed extended and, except as otherwise provided below, the Initial Option
Period shall terminate as of a date which is thirty (30) days following delivery
by the WMS Group of an Option Period Termination Notice, as provided below. If
the gross unit sales of Accepted Games by GTIS during any Renewal Option Year
shall be less than the Renewal Threshold Amount for such Renewal Option Year,
then the Renewal Option Period shall terminate as of a date which is thirty (30)
days following delivery by the WMS Group of an Option Period Termination Notice,
as provided below. Written notice (the "Option Period Termination Notice") of
termination of the Initial Option Period or the Renewal Option Period, as the
case may be, shall be given to GTIS not later than thirty (30) days following
the date on which royalty accounting statements under all Home Video Game
Distribution and License Agreements for the last quarter of such Initial Option
Period or such Renewal Option Year are due, provided, however, that if GTIS
shall not have furnished to the WMS Group all such accounting statements on or
before their due date (as provided in Section 6.1 of the Home Video Game
Distribution and License Agreement), the WMS Group may deliver an Option Period
Termination Notice on the basis of its reasonable estimate of GTIS' unit sales
during any Royalty Period for which accounting statements have not been
furnished by GTIS on or before the date upon which royalty accounting statements
are due for the last quarter of the Initial Option Period or any Renewal Option
Year. The Option Period Termination Notice shall specify the Renewal Threshold
Amount for the Initial Option Period or the prior Renewal Option Year, as the
case may be, the actual (or estimated) gross unit sales
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
of Accepted Games by GTIS during such Initial Option Period or Renewal Option
Year, and, in either case, the Minimum Royalty Shortfall Amount. This Agreement
shall terminate on a date which is thirty (30) days following delivery by the
WMS Group of the Option Period Termination Notice unless GTIS shall elect to
extend the term hereof by paying to the WMS Group, within such thirty (30) day
period, an amount equal to the Minimum Royalty Shortfall Amount specified in the
Option Period Termination Notice. The "Minimum Royalty Shortfall Amount" for the
Initial Option Period or any Renewal Option Year shall be an amount equal to an
amount by which the Renewal Threshold Amount for such Initial Option Period or
Renewal Option Year exceeds the actual (or estimated) gross unit sales of
Accepted Games by GTIS and its sublicensees in the Licensed Territory under all
Home Video Game Distribution and License Agreements during such Initial Option
Period or Renewal Option Year, multiplied by * Dollars. Notwithstanding the
foregoing, however, GTIS shall not be entitled to extend the term hereof, as
provided above, by paying the Minimum Royalty Shortfall Amount to the WMS Group
with respect to the Initial Option Period if the Minimum Royalty Shortfall
Amount in respect of such Initial Option Period is more than * Dollars. In no
event shall any Minimum Shortfall Amount paid by GTIS be recoupable against the
Guaranteed Advance Royalty or any future royalties payable to the WMS Group
under any Home Video Game Distribution and License Agreement. The "Renewal
Threshold Amount" for the Initial Option Period or any Renewal Option Year shall
be an amount equal to * of the gross unit sales of Accepted Games by the WMS
Group or its licensees in North America during the Initial Option Period or such
Renewal Option Year, as the case may be, provided, however, that in computing
the Renewal Threshold Amount with
9
<PAGE> 10
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
respect to any Accepted Game which has been legally banned from sale in Germany
or in the United Kingdom by reason of the content of such Accepted Game or for
any other reason beyond the control of GTIS, only * of the gross unit sales of
Accepted Games by the WMS Group or its licenses in North America during the
Initial Option Period or Renewal Option Year, as the case may be, shall be
counted, if such Accepted Game shall be banned in one, but not both of such
countries, and only * shall be counted if such Accepted Game shall be banned in
both such countries. An Accepted Game shall not be deemed to have been legally
banned if a modified version of such Accepted Game not containing the
objectionable material has been substituted. For purposes of computing gross
units of Accepted Games sold by GTIS and its sublicensees and subdistributors in
the Licensed Territory and by the WMS Group or its licensees in North America
during the Initial Option Period or during any Renewal Option Year, as provided
in this Section 2.1, (i) only gross units of Accepted Games sold at Full Price
shall be counted, and (ii) there shall be excluded (a) any Accepted Games which
relate primarily to American football, baseball or hockey, and (b) any gross
unit sales of any Accepted Games which have been First Released by the WMS Group
or its licensees during the last ninety (90) days of the Initial Option Period.
"Full Price" shall refer to the price of Games which have been marked down or
discounted (including rebates or credits (other than cooperative advertising
allowances which are unrelated to price protection) granted within one year of
the date of the First Release of the Game) by no more than * from the original
list price of the Game. The WMS Group shall give written notice to GTIS of the
good faith estimate of the Renewal Threshold Amount on or about six (6) months
prior to the expiration of the Initial Option Period.
10
<PAGE> 11
In determining whether a unit sold during the last twelve (12) months of
the Initial Option Period or during any subsequent Renewal Option Year qualifies
as a Full Price unit, discounts and markdowns will be deemed to have been
granted on such units in accordance with historical percentages based upon the
prior two (2) years. The WMS Group shall permit GTIS, at GTIS' own expense, to
have an independent certified public accountant inspect the books and records of
the WMS Group solely with respect to the calculation of any Renewal Threshold
Amount (but only in the event that the WMS Group shall have delivered to GTIS an
Option Period Termination Notice, as provided above), during reasonable hours,
upon five (5) business days prior written notice and subject to such
confidentiality agreements (including the execution of appropriate
confidentiality agreements), as the WMS Group may require.
The WMS Group shall advise GTIS within forty-five (45) days
following the end of each twelve (12) month period during the Initial Option
Period as to gross unit sales of Accepted Games by the WMS Group or its
licensees in North America calculated in the same manner as the Renewal
Threshold Amount is calculated pursuant to this Section 2.1 above.
Royalties payable on sales of Accepted Games with respect to
which GTIS has received a license or exercised an option to acquire a license
during the Renewal Option Period shall be subject to increase, as of the
commencement of the Renewal Option Period or any subsequent Renewal Option Year,
to reflect increases in GTIS' Weighted Average Gross Profits as a percentage of
GTIS' sales of Accepted Games during the Initial Option Period or during the
prior Renewal Option Year as provided in Schedule "B" to the Home Video Game
Distribution and License Agreement.
11
<PAGE> 12
2.2. The WMS Group shall not grant a license to
any third parties to manufacture, distribute and sell versions of a Game for use
on any specific Designated Consumer Game Platform if such Game would be subject
to GTIS' first option right to manufacture, distribute and sell versions of such
Game on such Designated Consumer Game Platform, as specified in Section 2.1
hereof, until such time as GTIS shall have declined to acquire a license, or the
option period specified in Section 2.3 hereof, whichever is applicable, shall
have expired, or the applicable Home Video Game Distribution and License
Agreement shall otherwise permit. GTIS understands, acknowledges and agrees that
(a) with respect to Games manufactured by the WMS Group under license from third
parties, the rights granted by the WMS Group to GTIS (i) cannot exceed the
rights obtained by the WMS Group with respect to such Games, (ii) will be
limited to the Licensed Territory, and (iii) are subject to all limitations
imposed on the WMS Group by such third party licensors, including limitations on
the WMS Group's right to sublicense or subdistribute, and the form of Home Video
Game Distribution and License Agreement will be deemed modified to the extent so
required; and (b) although the WMS Group is developing Games in the normal
course of business, the WMS Group is under no obligation to develop Games or to
present any minimum number of Games to GTIS under this Agreement.
2.3. If the WMS Group shall determine to develop or
acquire rights in a Game for play on a Designated Consumer Game Platform which
it intends to release in the United States during the Initial Option Period or
any Renewal Option Year or within twelve (12) months thereafter (a "Proposed
Game"), the WMS Group shall notify GTIS in writing, as soon as practicable, with
respect to such determination and shall furnish to GTIS any tentative
12
<PAGE> 13
development schedule for such Proposed Game. Such tentative development schedule
shall be subject to change at any time and from time to time and the WMS Group
reserves the right to abandon, suspend, or otherwise delay the development of
such Proposed Game in its sole and absolute discretion, provided, however, that
the WMS Group shall use reasonable efforts to keep GTIS apprised of material
scheduling changes and/or the achievement of milestones in connection with the
development of such Proposed Game. The WMS Group shall, as soon as practicable,
notify GTIS in writing with respect to (a) the characteristics and method of
play of such Proposed Game, (b) any material limitations or other terms and
conditions which may affect the scope of the license which may be granted to
GTIS (including copies of relevant contractual provisions where permitted), (c)
the amount or method of determining third party fees and royalties payable in
connection therewith, and (d) the date on which the WMS Group proposes to First
Release the Proposed Game in the United States (the "New Game Option Notice").
The WMS Group shall use reasonable efforts to advise GTIS with respect to all of
the information required to be included in the New Game Option Notice, as
provided above, at least one hundred and twenty (120) days prior to the proposed
release date of the Proposed Game by the WMS Group in the United States,
provided, however, that GTIS acknowledges and agrees that such information may
not then be available to the WMS Group and the WMS Group may not have fully
determined or negotiated all material limitations or other terms and conditions
which may affect the scope of the license or Third Party Fees and Royalties
payable with respect thereto. The date of such New Game Option Notice is
hereinafter referred to as the "New Game Option Notice Date." With respect to
each Proposed Game as to which GTIS receives a New Game Option Notice, as
hereinabove provided, GTIS shall have a period of sixty
13
<PAGE> 14
(60) days in which to notify WMS in writing that it either elects or declines to
exercise its option to license the Proposed Game. A notice that GTIS elects to
exercise its option to have the Proposed Game is referred to as a "New Game
Acceptance Notice." Any New Game Acceptance Notice given by GTIS shall in all
events be conditioned upon and subject to (i) the actual release of the Game by
the WMS Group in the United States within twelve (12) months following the end
of the Initial Option Period or any Renewal Option Year as provided in Section
2.4 below and (ii) the prior release of coin-operated versions of the Game, if
any, by the WMS Group no later than the end of the corresponding Initial Option
Period or Renewal Option Year. As soon as practicable following receipt of (a)
the New Game Acceptance Notice, and (b) notice from the Designated Consumer Game
Platform manufacturer of its acceptance of the Proposed Game for sale in the
United States, the WMS Group shall promptly furnish to GTIS a Master Disk with
respect to such Game as well as one NTSC and one PAL version of such Master
Disk. The WMS Group shall also furnish to GTIS, as soon as reasonably available,
(i) the beta version of the Game, (ii) text files and the text that appears in
bit map files, and printed copies of scripts used for audio components of CD-ROM
versions of the Proposed Game, for purposes of translating the Proposed Games
into languages other than English (as contemplated in the Home Video Game
Distribution and License Agreement), and (iii) copies of artwork, instruction
manuals, and other packaging, labeling and promotional materials to be used by
the WMS Group with respect to such Proposed Game substantially in commercially
reproducible form. Except as otherwise specifically provided below, GTIS shall
be solely responsible for all costs and out of pocket expenses required to
reprogram a Master Disk for use in connection with the sale of Accepted Games,
including, without limitation, editorial changes
14
<PAGE> 15
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
or adaptions to local markets, changes required by all manufacturers of
Designated Consumer Game Platforms and local rating boards or similar
governmental agencies in the Licensed Territory. The WMS Group shall bear costs
up to * Dollars for editorial changes per Accepted Game required by any German
or European approval boards for modifications to Accepted Games, subject in all
events to a maximum total required expenditure by the WMS Group during the
Initial Option Period of * Dollars and * Dollar during each Renewal Option Year.
GTIS and the WMS Group shall otherwise discuss in good faith any sharing of
costs of other editorial changes, but the WMS Group shall in no event have any
obligation to bear any additional costs of such editorial changes unless it
shall specifically agree in writing with respect thereto. Although the WMS Group
shall make reasonable efforts to advise GTIS with respect to the development
schedule of a Proposed Game and the intended First Release date of such Proposed
Game by the WMS Group in the United States, nothing herein shall be deemed to
require the WMS Group to alter, amend, delay, or suspend its development
schedule with respect to such Proposed Game, or its First Release date in the
United States.
2.4. Any Proposed Game or Game as to which GTIS has
exercised its option and furnished to the WMS Group a New Game Acceptance Notice
within the notice period specified in Section 2.3 above shall become an
"Accepted Game" for purposes of this Agreement, provided that such Game shall
have actually been released by the WMS Group in the United States within twelve
(12) months following expiration of the Initial Option Period or any Renewal
Option Year, and provided further that coin-operated versions of the Game, if
any, shall have previously been released by the WMS Group during the
corresponding Initial Option
15
<PAGE> 16
Period or Renewal Option Year. With respect to each Accepted Game, GTIS and the
member of the WMS Group which has released such Game shall enter into a Home
Video Game Distribution and License Agreement which shall be dated as of the
date of the New Game Acceptance Notice. If either of such parties shall delay or
wrongfully refuse to enter into a Home Video Game Distribution and License
Agreement with respect to any Accepted Game, then, in addition to any other
rights of the non-defaulting party hereunder, at the option of the
non-defaulting party, such Home Video Game Distribution and License Agreement
shall be deemed to have been entered into as of the date on which GTIS shall
have exercised its option to acquire the license of such Accepted Game as
provided herein. GTIS understands and agrees that it will have no rights
whatsoever in respect of any Game which does not become an Accepted Game in
accordance with the terms of this Agreement and for which a Home Video Game
Distribution and License Agreement is not duly executed (or deemed executed as
provided above), and the WMS Group may exploit its rights in any Game which does
not become an Accepted Game in any manner it sees fit, free and clear of this
Agreement provided, however, that if GTIS shall fail or decline to accept a
Proposed Game as provided in Section 2.3 above, and the WMS Group shall
thereafter make material changes in the programming of the Game or in the amount
of any Third Party Fees and Royalties payable with respect thereto, then the WMS
Group shall furnish to GTIS a new New Game Option Notice with respect to such
Game as so changed and GTIS shall thereafter have the right to accept such Game
as changed in the manner provided in Section 2.3 above. The WMS Group shall also
be entitled to exploit its rights with respect to any Game and to sell and
distribute such Game, free and clear of this Agreement, in any Marketing Area
with respect to which GTIS' right to sell and distribute such
16
<PAGE> 17
Game has been suspended or revoked (or has become non-exclusive) as provided in
Section 2.7 below and Section 3.3 of any Home Video Game Distribution and
License Agreement, provided however, that if the WMS Group shall thereafter make
material changes in the programming of such Game or in the amount of any Third
Party Fees and Royalties payable with respect thereto, then the WMS Group shall
furnish to GTIS a new New Game Option Notice with respect to such Game as so
changed and GTIS shall thereafter have the right to accept such Game as changed
in the manner provided in Section 2.3 above.
2.5. GTIS acknowledges that the WMS Group
manufactures and sells Games for many different entertainment platforms,
including coin-operated games and home games of all types, and that any Games in
respect of which GTIS obtains rights hereunder for exploitation on a specific
Designated Consumer Game Platform may be developed by the WMS Group for other
entertainment platforms, including other Designated Consumer Game Platforms, or
for territories not included in the Licensed Territory and GTIS will have no
rights therein.
2.6. The WMS Group agrees to use commercial
efforts, in its reasonable judgment, to acquire rights to exploit Games on
Designated Consumer Game Platforms throughout the Licensed Territory when it
acquires rights to exploit such Games in the United States. Except to the extent
that the WMS Group has heretofore granted rights (or any option, right of first
refusal or negotiations or other ability to obtain rights which may be
subsequently exercised) to manufacture, distribute or sell home video games on
Designated Consumer Game Platforms within the Licensed Territory to any third
party (including any renewals or extensions thereof resulting from the exercise
of previously granted rights), if the WMS Group develops internally any
coin-operated or home video game, then the WMS Group shall not license the
17
<PAGE> 18
right to use its computer software source code or object code for such
coin-operated or home video game to any third party for the purpose of
developing and/or marketing a Game for play on a Designated Consumer Game
Platform in the Licensed Territory, unless the WMS Group shall have first
offered to license such Game to GTIS as provided in this Agreement. With respect
to Games in which the WMS Group acquires or intends to acquire from a third
party rights to exploit such Games on Designated Consumer Game Platforms in the
United States, but with respect to which the WMS Group is unable or unwilling to
acquire rights to exploit such Games on Designated Consumer Game Platforms in
the Licensed Territory based on the WMS Group's reasonable judgment that such
rights are not available on commercially acceptable terms, or on terms which, in
the WMS Group's judgment, would make it uneconomical for the WMS Group to
acquire and license such rights to GTIS on the terms and conditions set forth
herein and in the Home Video Game Distribution and License Agreement, the WMS
Group shall so advise GTIS and GTIS shall have the reasonable opportunity to
consult with the WMS Group (and, in GTIS' discretion, to propose other licensing
or cost sharing arrangements with respect to such Game) prior to the WMS Group's
determination whether to accept or decline to accept such rights which shall be
made in good faith.
2.7. GTIS or its sublicensees shall actively
commence marketing and selling an Accepted Game in reasonable commercial
quantities in all Marketing Areas within the Licensed Territory within six (6)
months following the date upon which the WMS Group shall have First Released
such Accepted Game in the United States (the "Delivery Date"), provided however,
that such six (6) month period shall be extended for a period of sixty (60) days
in Marketing Areas, other than those designated as "Key Marketing Areas" on
Schedule C annexed
18
<PAGE> 19
to the Home Video Game Distribution and License Agreement, if GTIS shall have
proposed a sublicensee to distribute Licensed Products in such Marketing Area
and the WMS Group shall have withheld its approval of the sublicensee. If GTIS
or its sublicensees shall have failed to commence actively marketing and selling
an Accepted Game in any Marketing Area within the Licensed Territory within six
(6) months following the Delivery Date with respect thereto, then the WMS Group
shall have the right, in addition to any other rights which the WMS Group may
have hereunder or under any Home Video Game Distribution and License Agreement,
upon thirty (30) days written notice to GTIS, to suspend and revoke GTIS' or its
sublicensees' right to sell such Accepted Game in such Marketing Area or to
declare such right henceforth to be non-exclusive, as the WMS Group shall
determine. If GTIS or its sublicensees shall have failed to commence actively
marketing and selling three (3) or more Accepted Games which have been designed
for play on the same Designated Consumer Game Platform, in each case within six
(6) months following the Delivery Date with respect thereto, in any Marketing
Area within the Licensed Territory, then the WMS Group shall have the right,
upon thirty (30) days written notice to GTIS, permanently to suspend and revoke
GTIS' right to distribute and sell all future Accepted Games which have been
designed for play on the same Designated Consumer Game Platform in such
Marketing Area and to exclude such Marketing Area from the Licensed Territory
under all future Home Video Game Distribution and License Agreements for Games
which have been designed for play on such Designated Consumer Game Platforms.
Notwithstanding the foregoing, however, GTIS or its sublicensees shall not be
required to have actively commenced marketing and selling an Accepted Game in
any Marketing Area if the specific Designated Consumer Game Platform on which
such Accepted Game has been designed
19
<PAGE> 20
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
for play shall not regularly be sold at retail or otherwise not be generally
available to consumers in such Marketing Area or if such Accepted Game is banned
in the entire Marketing Area.
For purposes of documenting compliance with this
Section 2.7, GTIS shall submit a report, as of the date six (6) months following
the Delivery Date, listing the Marketing Areas in which GTIS has not commenced
actively marketing and selling an Accepted Game. Such report shall be sent to
the WMS Group within forty-five (45) days after the end of said six (6) month
period, and shall indicate the status for each Marketing Area listed (indicating
the date of expected First Release and whether a sublicensee has been
appointed). Such summary report shall be made in good faith, using the best
available information as of the date the report is submitted.
3. MINIMUM GUARANTEED ROYALTY; GUARANTEED ADVANCE
ROYALTY. In consideration for the option granted herein and as a guaranteed
minimum royalty in respect of the Initial Option Period, GTIS agrees to pay to
WMS the sum of * Dollars (the "Minimum Guaranteed Royalty") and to issue the
Warrants as set forth in Paragraph 4 below. The Minimum Guaranteed Royalty shall
be payable as follows: (a) the sum of * Dollars shall be payable as a guaranteed
advance royalty (the "Guaranteed Advance Royalty") in the following
installments: * Dollars shall be paid by wire transfer to WMS in immediately
available funds on the date hereof; * Dollars shall be paid on or before March
31, 1996; and * Dollars shall be paid on or before March 31, 1997; and (b) the
amount by which the Minimum Guaranteed Royalty exceeds royalties (including the
Guaranteed Advance Royalty and all Third Party Fees and Royalties) actually paid
by GTIS to the WMS Group in respect of the Initial Option Period
20
<PAGE> 21
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
under all Home Video Game Distribution and License Agreements entered into
pursuant to this Agreement, but in no event more than * Dollars, shall be paid
on or before the date which is forty-five (45) days following the expiration of
the Initial Option Period. Under no circumstances shall any amount paid by GTIS
in respect of the Minimum Guaranteed Royalty pursuant to clause (b) of the
preceding sentence be refundable or recoupable against any future royalties
payable to the WMS Group. It is also understood that under no circumstances
shall the WMS Group be required to repay any portion of the Guaranteed Advance
Royalty, nor shall GTIS be entitled to any set off or to claim the right not to
pay any portion of the Guaranteed Advance Royalty for any reason, except as
provided in Section 10 below; provided that GTIS shall be entitled to recoup
such payments out of royalties, to the extent provided in the Home Video Game
Distribution and License Agreements entered into pursuant to this Agreement. If
the payment of the installment of the Guaranteed Advance Royalty due on March
31, 1996 is not paid in full when due, the installment otherwise due on March
31, 1997 shall become immediately due and payable. The obligation to make
payment of the deferred installments of the Guaranteed Advance Royalty are being
fully secured by a clean standby letter of credit in the amount of * Dollars,
issued by Republic National Bank delivered to WMS not later than March 31, 1995.
If such letter of credit is not so delivered in form and substance satisfactory
to WMS, this Agreement shall be of no further force and effect and WMS shall
return to GTIS any amounts theretofore paid by GTIS to WMS. GTIS shall be
responsible for all costs and expenses, including legal fees, which may be
incurred by WMS in connection with its collection of the Minimum Guaranteed
Royalty or any portion thereof. WMS shall permit GTIS from time
21
<PAGE> 22
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to time to exchange the original or any substitute letters of credit for other
substitute letters of credit, provided that the newest substitute letters of
credit are (i) issued by Republic National Bank or another bank acceptable to
WMS, (ii) the amounts of the newest substitute letters of credit are not less
than the amounts then owed with respect to the above described deferred
payments; and (iii) the newest substitute letters of credit otherwise contain
the same terms and conditions as are contained in the letter of credit for which
it is being substituted. GTIS has advised the WMS Group of its intention to
effect an initial public offering ("IPO") of its common stock or preferred stock
convertible into common stock during the Initial Option Period. In the event
that GTIS shall complete such IPO during the Initial Option Period and, as a
result thereof, the additional or paid-in capital of GTIS shall be increased by
at least * Dollars, as shown on a balance sheet of GTIS certified by its
independent certified public accountants and furnished to the WMS Group, then
the WMS Group shall permit GTIS to cancel the letter of credit securing the
remaining deferred installments of the Guaranteed Advance Royalty. Cancellation
of such letter of credit shall in no way relieve GTIS of its obligation to make
payment of all remaining installments of the Guaranteed Advance Royalty as set
forth above.
4. WARRANTS. GTIS agrees that simultaneously with the
closing of any public offering of common stock, or of preferred stock
convertible into common stock, WMS will be issued stock purchase Warrants and
receive a registration rights agreement (or an amendment to a prior registration
rights agreement between the parties, which includes the shares purchasable upon
exercise of the Warrants being issued hereunder), in substantially the
22
<PAGE> 23
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
form annexed hereto as Exhibit B, with the number of shares purchasable upon
exercise of the Warrants being equal to * Dollars divided by the initial public
offering price of the common stock sold, or the conversion price of preferred
stock, whichever is applicable. The Warrants shall be exercisable for the class
of common stock issued and sold by GTIS pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act") in
an initial public offering (or the class of common stock receivable upon
conversion of any convertible preferred stock so issued and sold in an initial
public offering). GTIS shall have no obligation to undertake or complete an
initial public offering, and if it does not, GTIS will have no liability
whatsoever to the WMS Group and the WMS Group shall have no right to any
compensation in lieu of the Warrants referred to herein. The Warrants and the
shares issuable thereunder are being and will be acquired by the WMS Group for
investment and not with a view to the distribution thereof by the WMS Group, and
such warrants and shares will be "restricted securities" within the meaning of
the Securities Act. The WMS Group will not sell or dispose of such warrants or
shares except in compliance with the federal securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE WMS GROUP. The
members of the WMS Group represent and warrant that this Agreement has been duly
authorized, executed and delivered by each member of the WMS Group; each such
member has the full power and authority to enter into this Agreement and to
perform its obligations hereunder and this Agreement constitutes the valid and
binding obligation of each member of the WMS Group, enforceable in accordance
with its terms, and the making of this Agreement by the member of
23
<PAGE> 24
the WMS Group does not violate or conflict with any agreement, right or
obligation existing between any member of the WMS Group and any other person,
firm or corporation.
6. REPRESENTATIONS AND WARRANTIES OF GTIS. GTIS
represents and warrants that this Agreement has been duly authorized, executed
and delivered by GTIS; GTIS has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and this Agreement
constitutes the valid and binding obligation of GTIS enforceable in accordance
with its terms; and the making of this Agreement by GTIS does not violate or
conflict with any agreement, right or obligation existing between GTIS and any
other person, firm or corporation.
7. CONFIDENTIAL INFORMATION. GTIS shall keep in confidence and
not disclose or make available to any third party, without the written
permission of WMS, the terms of this Agreement and the proprietary information
of the WMS Group made known to it under this Agreement, including without
limitation any information with respect to Proposed Games prior to the date on
which they are First Released and any Master Disk or version thereof. Likewise,
the WMS Group shall keep in confidence and not disclose to any third party,
without the written permission of GTIS, the terms of this Agreement and the
proprietary information of GTIS made known to it under this Agreement. This
requirement of confidentiality shall not apply to information that is (a)
permitted to be disclosed under a Home Video Game Distribution and License
Agreement; (b) in the public domain through no wrongful act of the receiving
party; (c) rightfully received by the receiving party from a third party who is
not bound by a restriction of nondisclosure; (d) already in the receiving
party's possession without restriction as to disclosure; or (e) is required to
be disclosed by applicable rules and regulations of government
24
<PAGE> 25
agencies or judicial bodies. WMS or GTIS shall not issue any press release or
other public or trade announcement with respect to the transactions contemplated
by this Agreement unless the issuing party shall have first consulted with the
other with respect thereto and obtained the other's prior written approval
therefor, which approval will not be unreasonably withheld or delayed. The
obligations of confidentiality under this Section 7 shall survive termination of
this Agreement and either party shall be entitled to seek injunctive or
equitable relief to prevent the breach or threatened breach by the other of the
provisions of this Section and to secure its enforcement.
8. NOTICES. Any notice, consent, approval, request,
waiver or statement to be given, made or provided for under this Agreement shall
be in writing and deemed to have been duly given (a) by its delivery personally
or by express mail; or (b) five (5) days after its being mailed, air express,
registered or certified, return receipt requested, in a U.S. Post office
addressed as follows:
To GTIS:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz, President
Telephone Number: (212) 951-3107
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 951-3052
Facsimile Number: (212) 679-6850
25
<PAGE> 26
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 951-2379
Facsimile Number: (212) 679-6850
To WMS Group:
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
With a copy to:
Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
or such other address as either party may designate by notice given as
aforesaid.
26
<PAGE> 27
9. DEFAULT. In the event that GTIS shall default in any
of its material obligations hereunder or under any Home Video Game Distribution
and License Agreement and the WMS Group has provided notice of such default in
accordance with the provisions of Section 8 hereof, if GTIS has not cured such
default within fifteen (15) days of such notice, or within the grace periods
provided in the Home Video Game Distribution and License Agreement in respect of
payments thereunder, then, in addition to all other rights and remedies of the
WMS Group at law or in equity, at the option of the WMS Group, all rights
granted to GTIS under Section 2 of this Agreement shall be deemed terminated and
shall revert to the WMS Group, provided it is understood that notwithstanding
such termination, the Home Video Game Distribution and License Agreements with
respect to Accepted Games which were deemed entered into prior to such
termination, and which are not in default, shall remain in full force and
effect. No such termination shall in any way affect or diminish WMS' rights
hereunder, including without limitation, its rights under Sections 3, 4, 7 and
10 hereof, and the right of the WMS Group to receive the Minimum Guaranteed
Royalty. Anything herein to the contrary notwithstanding, the rights granted to
GTIS under Section 2 of this Agreement shall not be affected by an alleged
default by licensee under a Home Video Game Distribution and License Agreement
resulting from a bona fide dispute between licensor and licensee provided that
licensee pays all undisputed amounts to licensor and all disputed amounts are
paid into a bona fide third party escrow account.
10. OTHER TERMINATION. Anything in this Agreement to the
contrary notwithstanding, if gross unit sales of Accepted Games by GTIS and its
sublicensees in the Licensed Territory under all Home Video Game Distribution
and License Agreements deemed
27
<PAGE> 28
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to have been entered into pursuant to this Agreement during the portion of the
Initial Option Period that is prior to July 1, 1999 (the "Test Period") shall
not at least equal * of the gross unit sales of Accepted Games by the WMS Group
and its licensees in North America during such Test Period, then the WMS Group
shall have the right, in its sole and absolute discretion, to elect to terminate
all rights granted to GTIS under Section 2 of this Agreement, including any
further rights to acquire licenses to manufacture, distribute and sell versions
of the Games, provided that, notwithstanding such termination, all Home Video
Game Distribution and License Agreements with respect to Accepted Games which
were deemed entered into prior to such termination, and which are not in
default, shall remain in full force and effect. For purposes of calculating the
* of gross unit sales of Accepted Games by the WMS Group or its licensees in
North America during the Test Period with respect to any Accepted Game which has
been banned from sale by reason of the content of such Accepted Game or for any
other reason beyond the control of GTIS in (A) both Germany and the United
Kingdom, only * of the gross unit sales of Accepted Games by the WMS Group or
its licensees in North America during the Test Period shall be counted, or (B)
in either Germany or the United Kingdom, only 25% of the gross unit sales of
Accepted Games by the WMS Group or its licensees in North America during the
Test Period shall be counted. An Accepted Game shall not be deemed to have been
legally banned if a modified version of such Accepted Game not containing the
objectionable material has been substituted. In addition, for purposes of
computing gross units of Accepted Games sold by GTIS or its sublicensees and
subdistributors in the Licensed Territory or by the WMS Group or its licensees
in North America during the Test Period as provided in this Section 10, (i) only
28
<PAGE> 29
gross units of Accepted Games sold at Full Price shall be counted, and (ii)
there shall be excluded (a) any Accepted Games which relate primarily to
American football, baseball or hockey, and (b) any gross unit sales of any
Accepted Games which have been First Released by the WMS Group or its licensees
during the last ninety (90) days of the Test Period. If the WMS Group shall
elect to exercise its right to terminate, as provided above, it shall give
written notice thereof (a "Notice of Election") to GTIS within ninety (90) days
following the date on which the WMS Group shall have received all required
reports under all Home Video Game Distribution and License Agreements with
respect to Accepted Games sold by GTIS during the Test Period. Within thirty
(30) days following the date on which the WMS Group shall issue a Notice of
Election, the WMS Group shall (a) pay to GTIS an amount equal to any then
unrecouped portion of the Guaranteed Advance Royalty which has theretofore been
paid to the WMS Group, together with interest thereon at the prime rate
designated by Citibank, N.A. calculated from the date paid, and (b) surrender to
GTIS any outstanding letters of credit securing any remaining installments of
the Guaranteed Advance Royalty. No termination by the WMS Group of GTIS' rights
to continue to acquire licenses with respect to Games pursuant to the provisions
hereof shall in any way affect or diminish any rights of the WMS Group
hereunder, including its rights under Sections 4, 7 and 11 of this Agreement or
its right to continue to receive Royalties under any Home Video Game
Distribution and License Agreement which remains in effect, except that GTIS
shall not be entitled to any further recoupment of the Guaranteed Advance
Royalty and the WMS Group shall not be entitled to be paid any Minimum
Guaranteed Royalty pursuant to Section 3 hereof. The WMS Group shall permit
GTIS, at GTIS' own expense, to have an independent certified public accountant
inspect the books and records of the WMS Group solely
29
<PAGE> 30
with respect to the calculation of any gross unit sales of Accepted Games by the
WMS Group in North America during the Test Period (but only in the event that
the WMS Group shall have delivered to GTIS a Notice of Election, as provided
above), during reasonable hours, upon five (5) business prior written notice and
subject to such confidentiality agreements (including the execution of
appropriate confidentiality agreements), as the WMS Group may require.
11. NON-SOLICITATION.
During the Initial Option Period and any Renewal
Option Period and for a further period of two (2) years thereafter, neither GTIS
nor the WMS Group shall, for itself or on behalf of any other person,
partnership, corporation or entity, directly or indirectly, or by action in
concert with others (a) solicit, induce, or encourage any person to terminate
his or her employment or other contractual relationship with the other party or
any of its affiliates, or (b) solicit, induce, or encourage any designer,
developer, salesperson or other person known to have a contractual relationship
with the other party to discontinue, terminate, cancel or refrain from entering
into any design, development, sales or other contractual relationship with the
other party or any of its affiliates. Each party agrees that the parties hereto
shall be entitled to injunctive or other equitable relief to prevent the breach
or threatened breach by it of the provisions of this section and to secure its
enforcement.
12. MISCELLANEOUS.
12.1. This Agreement is personal to GTIS as one
party and the WMS Group as the other party. Neither this Agreement nor any
party's rights under it may be assigned, in whole or in part, nor may its
obligations be delegated, in whole or in part, to any person or party without
the prior written consent of the other party, except that any party may
30
<PAGE> 31
assign its rights and delegate obligations to any of its direct or indirect
wholly-owned subsidiaries or affiliates or to any person, firm or corporation
owning or acquiring all or substantially all of the stock or assets of that
party, as long as that party remains fully liable for its obligations hereunder.
Any sale of all or substantially all of the assets of any member of the WMS
Group shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by the seller pursuant to the terms
of this Agreement, including its obligations with respect to Games and the
intellectual property from which they are derived. This Agreement shall bind the
parties, their successors and permitted assignees and delegees. The members of
the WMS Group, as one party, and GTIS (including its subsidiaries and affiliates
as one party) are each jointly and severally liable for their respective
obligations under the terms of this Agreement.
12.2. The entire understanding between the parties
hereto relating to the subject matter hereof is contained herein. This Agreement
cannot be changed, modified, amended or terminated except by an instrument in
writing executed by the parties hereto.
12.3. 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 no
waiver shall be deemed or construed to be a waiver of such terms or conditions
for the future or any subsequent breach thereof.
12.4. This Agreement does not constitute and shall
not be construed as constituting a partnership or joint venture between the WMS
Group and GTIS, and neither the WMS Group nor GTIS shall have any right to
obligate or bind the other in any manner
31
<PAGE> 32
whatsoever, and nothing herein contained shall give or is intended to give any
rights of any kind to any third persons.
12.5. This Agreement shall be governed by the laws
of the State of Illinois applicable to contracts made and to be wholly performed
in the State of Illinois.
12.6. 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, either such provision will be deemed amended
to conform to such laws or regulations without materially altering the intention
of the parties, or it shall be stricken and the remainder of this Agreement
shall remain in full force and effect.
12.7. This Agreement may be executed in counterparts
each of which shall be deemed an original and when taken together shall be
deemed one and the same document.
32
<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
WMS INDUSTRIES INC
By: /s/ Neil D. Nicastro
------------------------------
WILLIAMS ELECTRONICS GAMES, INC.
By: /s/ Neil D. Nicastro
------------------------------
MIDWAY MANUFACTURING COMPANY
By: /s/ Neil D. Nicastro
------------------------------
WILLIAMS ENTERTAINMENT INC.
By: /s/ Byron Cook
------------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Joe Cayre
------------------------------
33
<PAGE> 34
SCHEDULE 1
1. License Agreement dated June 28, 1994 between Sony Electronic
Publishing Company and Midway Manufacturing Company.
2. Letter of agreement dated January 6, 1994 between Tradewest Inc. and
Sony Electronic Publishing Limited.
3. First Right of Negotiation Agreement dated March 28, 1994 between WMS
Industries Inc. and Williams/Nintendo Inc.
4. License Agreement dated August 1, 1993 between Acclaim Entertainment
Inc. and Midway Manufacturing Company with respect to WWF wrestling
games.
5. Letter Agreement dated September 19, 1994 between Atari Corporation and
WMS Industries Inc. with respect to Defender, Defender II, Robotron &
Joust.
<PAGE> 35
EXHIBIT A
HOME VIDEO GAME
DISTRIBUTION AND LICENSE AGREEMENT
AGREEMENT made this ___ day of __________, 199__, by and between GT
INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices at 16 East 40th
Street, New York, New York 10016 (herein called "Licensee") and [MIDWAY
MANUFACTURING COMPANY], [WILLIAMS ELECTRONICS GAMES, INC.] [WILLIAMS
ENTERTAINMENT INC.] a Delaware corporation with offices at 3401 North California
Avenue, Chicago, Illinois 60618 (herein called "Licensor").
W I T N E S S E T H:
WHEREAS, Licensor owns or controls the right to manufacture, sell and
distribute Home Video Games (as hereinafter defined) containing the Licensed
Property (as hereinafter defined) in the Licensed Territory (as hereinafter
defined); and
WHEREAS, Licensor and Licensee are parties to the GTIS Master Agreement
(as hereinafter defined) pursuant to which Licensee has exercised its right and
option to acquire a license to manufacture, distribute and sell Home Video Games
embodying the Licensed Property in the Licensed Territory;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. "Alternative Royalty" shall have the meaning
ascribed in Schedule "B" annexed hereto.
<PAGE> 36
1.2. "Cartridge-Based Product" shall have the
meaning ascribed in Schedule "B" annexed hereto.
1.3. (1) "Cartridge Margin" shall have the meaning
ascribed in Schedule "B" annexed hereto.
1.4. "Computer Software" or "Software" shall mean
computer software in the form of a cartridge, CD-ROM disk or other device
containing substantially full and complete computer game code, including the
source code, the assembly code, the object code and such data files and other
files as are necessary for the Licensed Product to achieve its functional
purpose, whereby data and visual images, with or without sound, can be
manipulated, communicated, reproduced or perceived with the aid of a Designated
Consumer Game Platform.
1.5. "Delivery Date" shall have the meaning
ascribed in Section 2.7 of the GTIS Master Agreement.
1.6. "Designated Consumer Game Platform" shall have
the meaning ascribed in Section 1.4 of the GTIS Master Agreement.
1.7. "Exporter" shall have the meaning ascribed in
Section 3.2 hereof.
1.8. "First Foreign Sale" shall have the meaning
ascribed in Schedule "B" annexed hereto.
1.9. "First Release" or "First Released" shall have
the meaning ascribed in Section 1.5 of the GTIS Master Agreement.
1.10. "Front-line" shall have the meaning ascribed
in Schedule "B" annexed hereto.
1.11. "Full Price" shall have the meaning ascribed
in Section 1.6 of the GTIS Master Agreement.
2
<PAGE> 37
1.12. "Game" shall have the meaning ascribed in
Section 1.7 of the GTIS Master Agreement.
1.13. "GTIS Master Agreement" shall mean the GTIS
Master Option and License Agreement (Home Video Games) dated March 31, 1995,
among Licensee, WMS Industries Inc., Midway Manufacturing Company, Williams
Electronics Games, Inc. and Williams Entertainment Inc.
1.14. "Guaranteed Advance Royalty" shall have the
meaning ascribed in Section 3 of the GTIS Master Agreement.
1.15. "Home Video Game" shall mean Computer Software
designed to operate solely on a specific Designated Consumer Game Platform.
1.16. "Initial Option Period" shall have the meaning
ascribed in Section 1.11 of the GTIS Master Agreement.
1.17. "Late Charge" shall have the meaning ascribed
in Section 6.5 hereof.
1.18. "Late Report" shall have the meaning ascribed
in Section 6.5 hereof.
1.19. "Licensed Products" shall mean Home Video
Games embodying the Licensed Property.
1.20. "Licensed Property" shall mean the
intellectual property, game concepts, descriptions, characteristics and method
of play described in the New Game Option Notice and/or on Schedule A and
embodied in the "Licensed Products."
1.21. "Licensed Territory" shall have the meaning
ascribed in Section 3.1 of this Agreement.
1.22. "Marketing Area" shall have the meaning
ascribed in Section 3.3 hereof.
1.23. "Master Disk" shall have the meaning ascribed
in Section 1.15 of the GTIS Master Agreement.
3
<PAGE> 38
1.24. "Net Wholesale Sales Price" shall have the
meaning ascribed in Schedule "B" annexed hereto.
1.25. "New Game Option Notice" shall have the
meaning ascribed in Section 2.3 of the GTIS Master Agreement.
1.26. "Other Home Video Game Distribution and
License Agreements" shall have the meaning ascribed in Schedule "B" annexed
hereto.
1.27. "Recoupable Amount" shall have the meaning
ascribed in Schedule "B" annexed hereto.
1.28. "Renewal Option Period" shall have the meaning
ascribed in Section 2.1 of the GTIS Master Agreement.
1.29. "Renewal Option Year" shall have the meaning
ascribed in Section 2.1 of the GTIS Master Agreement.
1.30. "Royalty" shall have the meaning ascribed in
Schedule "B" annexed hereto.
1.31. "Royalty Period" shall have the meaning
ascribed in Section 6.1 hereof.
1.32. "Term of this Agreement" or "period of this
Agreement" or "term hereof" or "so long as this Agreement remains in force" or
words of similar connotation shall include the initial period of this Agreement
and the period of all renewals, extensions, substitutions or replacements of
this Agreement.
1.33. "Third Party Fees and Royalties" shall mean
all fees, royalties and other participations of any kind or nature payable by
Licensor to any third party, including developers, licensors and others having
rights in connection with the exploitation of the Licensed Products. There shall
be excluded from the term "Third Party Fees and Royalties" as used herein (a)
any fees or royalties payable to employees or consultants by Licensor or its
affiliates with respect to the development of the Licensed Product in house; and
(b) advances paid to any third party having rights
4
<PAGE> 39
in connection with the exploitation of the Licensed Products (other than persons
referred to in clause (a)), provided, however, that if such advances are
recoupable by Licensor or its affiliates from future royalties payable to such
third party, then Third Party Fees and Royalties shall include such royalties
which would otherwise be payable to such third party were it not for such right
of recoupment.
1.34. "Weighted Average Gross Profits" shall have
the meaning ascribed in Schedule "B" annexed hereto.
2. GRANT OF LICENSE.
2.1. Licensor hereby grants and Licensee hereby
accepts, for the term of this Agreement and subject to the terms hereinafter set
forth, the exclusive license to manufacture, distribute, subdistribute and sell
the Licensed Products in the Licensed Territory. Licensee shall have the right
to sublicense any of the rights granted to Licensee hereunder to affiliates of
GTIS, as such term is defined in Section 1.8 of the GTIS Master Agreement, and,
with Licensor's prior written consent, which consent shall not be unreasonably
withheld or delayed, to unaffiliated third parties. Without limiting the
generality of the foregoing, Licensor shall not unreasonably withhold or delay
its consent to proposals by Licensee to sublicense its rights hereunder to third
party dedicated home video game hardware platform manufacturers for the purpose
of "bundling" the Licensed Products together with such hardware products for
distribution only within the Licensed Territory. Licensee shall not have the
right to sublicense its rights hereunder (and Licensor may withhold its consent
to any proposed sublicense) to any third party for the purpose of distributing,
or to any third party who Licensee knows or could reasonably expect intends to
sell or distribute, the Licensed Products outside of the Licensed Territory.
Licensor may also withhold its consent to any proposed sublicense arrangement,
if as a result thereof, it can be reasonably anticipated that Royalties which
may become payable to Licensor on account of sales of Licensed Products in the
Marketing Areas designated as "Key Marketing Areas" on Schedule C will be less
than if such Licensed Products were sold directly by Licensee. It is understood
5
<PAGE> 40
that the term "Licensed Products" does not include Computer Software designed
for play on (a) the Atari Jaguar(R) system, the 3D-O(R) system, and their
respective successors (including any enhancements, improvements or updates),
except only to the extent that Licensor or any of its affiliates shall itself
(and not through any licensee or sublicensee) actually release the Licensed
Products for commercial sale in the ordinary course of business on such hardware
platforms in the United States; (b) any multipurpose home or personal computer
systems; or (c) any other medium of exploitation, including handheld games,
Computer Software playable on dedicated home video game hardware having a
microprocessor of less than 32 bit capacity (excluding SNES and Sega Genesis),
over the air, cable or fiber optic transmission, other than Designated Consumer
Game Platforms; all of which remain the sole property of Licensor. No license is
granted hereunder for the manufacture, sale or distribution of Licensed Products
to be used as premiums, in combination sales, as giveaways or to be disposed of
under similar methods of merchandising, except only that Licensee shall have the
right, subject to rights of third parties in the Licensed Property, to
distribute Licensed Products as premiums, combination sales or giveaways solely
(i) subject to Licensor's consent, which shall not unreasonably be withheld or
delayed, in connection with the sale and distribution of other Home Video Games
licensed to Licensee by Licensor or its affiliates under Other Home Video Game
Distribution and License Agreements, and (ii) with respect to free or
promotional goods in the quantities set forth on Schedule "B" annexed hereto.
2.2. This license does not include any rights to
subsequent versions of the Licensed Property (so- called "sequels" or
"derivatives"), such rights being retained by Licensor, except as the same are
otherwise required to be offered to Licensee under the GTIS Master Agreement.
3. LICENSED TERRITORY.
3.1. Licensee shall be entitled to manufacture,
distribute and sell the Licensed Products in all countries throughout the world,
except (a) the United States of America, its territories, possessions and United
States military installations worldwide; Canada; Mexico; and Japan; and (b)
6
<PAGE> 41
countries or locations which are excluded under the terms of any license
agreement between Licensor and any third party having rights to the Licensed
Property. The territory in which Licensee shall be entitled to manufacture, sell
and distribute the Licensed Products as specified above is herein referred to as
the "Licensed Territory."
3.2. Licensor shall have the exclusive right to
license to third parties or otherwise exploit for its own account any of its
rights with respect to the Licensed Property outside of the Licensed Territory
(and in any portion of the Licensed Territory in which Licensee's right to
distribute Licensed Products have been revoked, suspended, or declared
non-exclusive in accordance with Section 3.3 below), and Licensee shall not
manufacture, distribute or sell any Licensed Products or otherwise exploit the
Licensed Property directly or indirectly in any area other than the Licensed
Territory. Without limiting the generality of the foregoing, Licensee shall not
at any time sublicense, distribute or sell any Licensed Products to any
distributor or customer who Licensee knows or could reasonably expect, based on
objective evidence, intends to resell or export the Licensed Products outside of
the Licensed Territory. Licensor shall similarly not at any time license,
distribute or sell any Licensed Products to any licensee, distributor or
customer who Licensor knows or could reasonably expect, based on objective
evidence, intends to resell or export the Licensed Products within the Licensed
Territory. A licensee, sublicensee, distributor or customer who wrongfully
resells or exports Licensed Products from the Licensed Territory to North
America or Japan, or from North America or Japan to the Licensed Territory, is
referred to as an "Exporter." Licensor and Licensee shall have the right, in
addition to any other rights which they may have hereunder, to require the other
to terminate any license, distribution agreement or arrangement with any such
Exporter who is wrongfully distributing Licensed Products in violation of the
rights of the other party. Licensor shall also have the right to delay for a
period up to three (3) months the introduction of any new Licensed Products into
any country in which such Exporter may be located or is operating.
7
<PAGE> 42
3.3. Licensee shall actively commence marketing and
selling the Licensed Products within the Licensed Territory in reasonable
commercial quantities within six (6) months following the Delivery Date,
provided however, that such six (6) month period shall be extended for a period
of sixty (60) days in Marketing Areas, other than those designated as "Key
Marketing Areas" on Schedule C annexed hereto if (a) Licensee shall have
proposed a sublicensee to distribute Licensed Products in such Marketing Area
and the Licensor shall have withheld its approval of the sublicensee or (b) if
Licensee shall have exercised its right, pursuant to Section 3.2 above, to delay
the introduction of new Licensed Products into any country within the Marketing
Area by reason of the location or operation of an Exporter in such Marketing
Area. If Licensee shall fail to have commenced actively marketing and selling
the Licensed Products in any country or in any related group of countries as
described on Schedule "C" annexed hereto, (a "Marketing Area") within the
Licensed Territory within six (6) months following the Delivery Date with
respect thereto, then the Licensor shall have the right, in addition to any
other rights which Licensor may have hereunder, upon thirty (30) days prior
written notice to Licensee, to suspend or revoke Licensee's right to sell the
Licensed Products in such Marketing Area or to declare such right henceforth to
be nonexclusive, as Licensor shall determine. Notwithstanding the foregoing,
however, Licensee shall not be required to have actively commenced marketing and
selling a Licensed Product in any Marketing Area if the specific Designated
Consumer Game Platform on which such Licensed Product has been designed for play
shall not regularly be sold at retail or otherwise not be generally available to
consumers in such Marketing Area or if the Licensed Product is banned in the
entire Marketing Area.
3.4. For purposes of documenting compliance with
Section 3.3 above, Licensee shall submit a report, as of the date six (6) months
following the Delivery Date, listing the Marketing Areas in which Licensee has
not commenced actively marketing and selling an Accepted Game. Such report shall
be sent to Licensor within forty-five (45) days after the end of said six (6)
month period,
8
<PAGE> 43
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
and shall indicate the status for each Marketing Area listed (indicating the
date that marketing and selling is expected to begin and whether a sublicensee
has been appointed or will be replaced). Such summary report shall be made in
good faith, using the best available information as of the date the report is
submitted.
4. TERM.
The license granted hereunder shall be effective on
the date hereof and shall terminate on the earlier of (a) five (5) years from
the date hereof, or (b) upon termination of Licensor's rights obtained from
third parties, unless sooner terminated in accordance with the terms and
conditions hereof; provided, however, that subject to the earlier termination of
Licensor's rights obtained from third parties, the license term shall be deemed
extended for up to two (2) additional one (1) year renewal terms, if during the
immediately preceding year, sales of Licensed Products in the Licensed Territory
shall have amounted to at least * units. If Licensee's sales of Licensed
Products in the Licensed Territory during the first of such additional one-year
renewal term shall be less than * units, Licensee may pay to Licensor an amount
equal to * Dollars per unit multiplied by the number of units less than * sold
by Licensee during such year to make up the shortfall and the license term shall
then be extended for the remaining renewal year.
5. CONSIDERATION.
Licensee shall pay Licensor, with respect to sales
throughout the Licensed Territory of the Licensed Products, a Royalty as
specified in Schedule "B" annexed hereto on each unit of Licensed Product sold.
6. ACCOUNTINGS.
6.1. Licensee agrees to forward to Licensor at
Licensor's address set forth in Section 17 (with a copy to Williams
Entertainment Inc., 1800 South Business 45, Corsicana, Texas
9
<PAGE> 44
75110), within forty-five (45) days after the end of each calendar quarter (a
"Royalty Period"), commencing with the first calendar quarter during which any
unit of the Licensed Product is sold, a report of the number of units of the
Licensed Products sold within such Royalty Period and a calculation, in
reasonable detail and reported separately by Marketing Area, of the Royalty,
including any Alternative Royalty, due on account of the sale of such units in
accordance with Section 6.3 below and Schedule "B" annexed hereto, and any
recoupment of the Guaranteed Advance Royalty claimed in accordance with Schedule
"B" annexed hereto and Section 3 of the GTIS Master Agreement. Such report shall
also include a cumulative reconciliation of the number of units of Licensed
Products produced by Licensee to the number of units on hand. Licensee agrees
that accompanying each such report shall be payment, in United States funds, of
the Royalties due to Licensor, if any, in respect of such Royalty Period in
excess of any permitted recoupment. Royalties calculated in foreign currencies
shall be converted to United States currency at the spot rate of exchange
published in the Wall Street Journal as of the last day of the Royalty Period.
Such reports shall be required to be submitted with respect to sales and
distributions of the Licensed Product whether or not any amounts are due under
the terms hereof.
6.2. Licensee agrees to keep accurate books of account
and records with respect to the Licensed Products, covering all sales, purchases
and inventories of Licensed Products and all Royalties due under this Agreement,
at Licensee's offices (or the offices of Licensee's affiliates) and to permit
(or procure the right for) Licensor at its own expense to have accounting
professionals (which may include Licensor's employees who have accounting
degrees) inspect such books of account and records of Licensee or its
sublicensees during reasonable business hours (but not during the first three
(3) weeks of a calendar quarter), upon prior reasonable written notice, for the
sole purpose of verifying the reports to be provided hereunder. Such
inspections, together with inspections of Licensee's books of account and
records pertaining to other Home Video Games licensed to Licensee by Licensor or
its
10
<PAGE> 45
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
affiliates under Other Home Video Game Distribution and License Agreements,
shall occur no more frequently than twice during any twelve (12) month period
for each of the Licensee's offices. Licensor's inspectors shall not be
physically present in a specific office of Licensee for more than ten (10)
consecutive business days in connection with any such inspection, provided that
Licensee shall have supplied all requested information and documentation and
responded to questions on a reasonably prompt basis. Licensee shall promptly
furnish to Licensor copies of any report which Licensee may produce as the
result of any audit by Licensee of the books of account and records of any
sublicensee of Licensee. Licensor shall keep any information obtained from any
such inspections in confidence and shall require that its accounting
professionals do so as well. Licensee's books relating to any particular Royalty
statement may be examined as aforesaid only within two (2) years after the date
rendered and Licensee shall have no obligation to permit Licensor to so examine
such books relating to any particular Royalty statement more than once for any
one statement, unless in connection with a civil action filed by Licensor
against Licensee in connection with such statement. In the event that any audit
by Licensor's accounting professionals reveals that Licensee has underpaid
Licensor by an aggregate of * or more with respect to the specific Royalty
statements which are the subject of such audit, Licensee agrees that it shall
also reimburse Licensor for the reasonable documented costs for any such audit
(including traveling costs) up to the amount of the shortfall.
6.3. Royalties shall be paid on * of products sold
by Licensee's point of sale ("POS") customers, less actual returns. With respect
to shipments to non-POS customers, not less than * of the shipment shall be
deemed a sale for Royalty purposes on the date of shipment. Not less than * the
balance of the shipment, less actual returns, shall be deemed a sale for Royalty
purposes six (6) months following the date of shipment, and the balance of such
shipment, less actual returns not already
11
<PAGE> 46
counted, shall be deemed a sale for Royalty purposes twelve (12) months
following the date of shipment. As used herein, POS customers mean those
customers who report actual sales by selection number to Licensee via computer
and scan their sales by UPC codes at cash registers.
6.4. Licensor shall permit Licensee, at Licensee's own
expense, to have an independent certified public accountant inspect Licensor's
books and records with respect to the payment by Licensor of Third Party Fees
and Royalties in connection with the Licensed Products, during reasonable hours,
upon prior reasonable written notice and subject to such confidentiality
requirements (including the execution of appropriate confidentiality agreements)
as Licensor may require, for the sole purpose of verifying payment and
calculation by Licensor of such Third Party Fees and Royalties. Licensor's books
and records may be examined by Licensee's representatives not more frequently
than twice in any twelve-month period and Licensee and Licensor shall otherwise
have substantially the same rights as provided to the other under Section 6.2
above.
6.5. Licensee recognizes that the timely submission of
all reports required to be submitted to Licensor pursuant to Section 6.1 hereof
is critical for Licensor to maintain good relations with its third party
licensors as well as for Licensor's own financial reporting requirements.
Therefore, in addition to any other rights and remedies of Licensor, if Licensee
shall be late by more than five (5) business days with respect to any report
and/or Royalty payment required to be submitted to Licensor pursuant to Section
6.1 hereof (a "Late Report"), then Licensee shall pay to Licensor a late charge
("Late Charge") at a rate equal to the prime rate designated by Citibank N.A. on
any Royalties covered by such Late Report that are actually payable to Licensor
as provided in Schedule B. Such Late Charge shall be computed from the 46th day
following the last day of the calendar quarter for which such Late Report is due
until the date actually paid. Licensor may elect to waive payment of any such
Late Charge if Licensee shall have provided a reasonable estimate of Royalties
due within fifteen (15) days following the end of the calendar quarter covered
by such Late Report.
12
<PAGE> 47
6.6. At the time that the Licensor shall provide to
Licensee notice of availability of a Game pursuant to Section 2.4 or 2.5 of the
GTIS Master Agreement, Licensor shall provide to Licensee sufficient data to
enable Licensee to calculate Third Party Fees and Royalties payable with respect
to each Licensed Product (without regard to any advances which may have been
made by Licensor). If Licensee is unable to calculate specific Third Party Fees
and Royalties from the data provided, Licensee may request assistance from
Licensor with respect thereto, and Licensor shall use its best efforts to
respond within seven (7) days from the date of such request, but Licensee shall
provide all sales and other data in its possession which are necessary for such
calculations.
7. QUALITY OF LICENSED PRODUCT.
7.1. The Licensed Products as manufactured,
advertised, sold, distributed or otherwise disposed of by Licensee under this
Agreement shall be of a high quality and shall be sold and distributed in
packaging prescribed by Licensor bearing Licensor's trademarks and trade names.
Such packaging may indicate that the Licensed Products are distributed by
Licensee. Licensor shall have the right to determine in its reasonable
discretion whether the Licensed Product meets Licensor's high standards of
merchantability. Licensee agrees to furnish Licensor free of cost for Licensor's
written approval as to quality and style (which approval shall not be
unreasonably withheld), samples of the Licensed Product, together with its
proposed advertising, packaging and wrapping materials, before its manufacture,
sale or distribution (whichever first occurs) and the Licensed Product shall not
be sold or distributed by Licensee without such written approval.
7.2. If Licensor shall disapprove of any item
submitted by Licensee for approval hereunder, Licensor shall furnish at the time
notice of disapproval is given to Licensee an explanation of the reason(s) for
such disapproval and recommendations for suggested changes and Licensee shall
resubmit such item after changes have been made for Licensor's approval.
13
<PAGE> 48
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
7.3. In the event that the quality of any Licensed
Product approved by Licensor shall become less than that approved by Licensor
and Licensee shall fail to raise the quality to the approved level within thirty
(30) days after received written notice from Licensor, the license granted under
this Agreement for such Licensed Product shall automatically terminate and shall
remain terminated until Licensor shall subsequently renew its approval of the
Licensed Product.
7.4. If disapproval is not given by Licensee within
five (5) business days after Licensor's receipt of the item submitted for
approval, Licensor's approval shall be deemed to have been given. Subsequent to
final approval, Licensor may request the Licensee once each quarter to send,
without charge, a reasonable number of production samples (but in any event not
less than * copies of each language version) without payment of any Royalty
hereunder to Licensor to ensure quality control. Should Licensor require
additional samples for any reason other than resale or any other commercial
exploitation by Licensor, Licensee shall be required to sell such samples to
Licensor at its cost (but without payment of any Royalties hereunder), but not
more than * units of each Licensed Product.
8. ADVERTISING.
Licensee, at its own cost and expense, shall be solely
responsible for all advertising costs, including all in store and institutional
advertising costs, associated with the sale of Licensed Products in the Licensed
Territory.
9. TRADEMARK AND COPYRIGHT, ETC.
9.1. "Notice" as used in this Section shall mean the
following statutory copyright notice and notice of registration or application
for registration of the licensed trademark:
_ _ _ _ (TM) or (R)
All Rights Reserved
C _ _ _ _ Licensed from [Midway Manufacturing Company(R)]
[Williams(R) Electronics Games, Inc.]
[Williams(R) Entertainment Inc.]
14
<PAGE> 49
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensor shall advise Licensee prior to use
whether (TM) or (R) shall follow the words " _ _ _ _ ."
9.2. Licensee shall furnish to Licensor samples of all
packaging in which the Licensed Products are sold by Licensee and Licensor shall
cause the copyright in the packaging to be registered with the United States
Copyright Office and recorded with the United States Customs Department at
Licensor's expense. Licensee shall print, stamp or mold the Notice on all
Licensed Products and on the front of each package or container used in
connection therewith, and Licensee shall print the Notice on each label,
advertisement and promotional release concerning any Licensed Products, all in
accordance with instructions from Licensor, providing, however, that such notice
shall be imprinted on the back of the package or container used in connection
therewith, displayed on the title screen of the Licensed Product, and in the
instruction booklet, if any, packaged with the Licensed Product. Licensee agrees
to execute and deliver to Licensor in such form as Licensor may reasonably
request all instruments necessary to effectuate trademark protection or to
record Licensee as a registered user of any trademarks or to cancel such
registration and if Licensee fails to execute such instruments, Licensee hereby
appoints Licensor Licensee's attorney-in-fact to do so on Licensee's behalf.
Licensee shall also furnish Licensor samples of all advertising or promotional
materials bearing the Notice for Licensor's approval.
9.3. Subject to the terms of this Agreement, Licensee
acknowledges and agrees that: All copyrights, trademarks and service marks and
rights to same referred to in this Section 9 in the name of and/or owned by
Licensor shall be and remain the sole and complete property of Licensor; that
all such copyrights, trademarks and service marks and rights to same in the name
of or owned by any copyright proprietor other than Licensor or Licensee shall be
and remain the sole and complete property of such copyright proprietor; that all
trademarks and service marks which, and/or the right to
15
<PAGE> 50
use which, arise out of the license hereby granted to use the Licensed Property
shall be and remain the sole and complete property of Licensor; that Licensee
shall not at any time acquire or claim any right, title or interest of any
nature whatsoever in any such trademark or service mark by virtue of this
Agreement or of Licensee's uses thereof in connection with the Licensed
Products; and that any right, title or interest in or relating to any such
trademark or service mark, which comes into existence as a result of, or during
the term of, the exercise by Licensee of any right granted to it hereunder shall
immediately vest in Licensor.
9.4. Licensee agrees to assist Licensor at Licensor's
expense to the extent necessary in the procurement of any protection or to
protect any of Licensor's right to the Licensed Property. Licensee shall notify
Licensor in writing of any infringements or imitations by others of the Licensed
Property on articles similar to those covered in this Agreement which may come
to the Licensee's attention. Licensor shall have the right to commence action to
enforce its proprietary rights and prosecute any such infringements, and
Licensee agrees to fully cooperate, at Licensor's expense, in any such action.
However, Licensee shall not incur any such expense reimbursable by Licensor
without Licensor's express written approval and all recoveries resulting from
any such action shall belong solely to Licensor. In the event Licensor declines
to pursue any such action, Licensee may, with Licensor's written permission, and
subject to the consent of any third party having rights in the Licensed
Property, institute such an action, and Licensor, at Licensee's expense, shall
cooperate in such action instituted by Licensee and all recoveries resulting
from any such action shall belong solely to Licensee. Licensor shall not
unreasonably withhold or delay its permission to enable Licensee to pursue an
action (if Licensor shall decline to pursue such action) against persons or
entities reasonably believed by Licensee to be counterfeiting or pirating
Licensee's Licensed Products. Licensor shall not unreasonably withhold or delay
its permission to grant to any sublicensee who requires it, at the time of
entering into
16
<PAGE> 51
a sublicense, reasonable rights (without Licensor's prior consent in each
instance) to pursue persons reasonably believed to be engaged in counterfeiting
or piracy of the Licensee Product.
9.5. During the term of this Agreement and thereafter,
Licensee:
(a) will not challenge the ownership or rights
of Licensor in and to the Licensed Property or any copyright or trademark
pertaining thereto developed by or for Licensor, nor attack the validity of the
license granted hereunder or participate in any challenge thereto;
(b) will manufacture, sell and distribute the
Licensed Products in compliance with all applicable laws and governmental
regulations in accordance with the terms of this Agreement;
(c) will not except as set forth in this
Agreement, either directly or indirectly, use or display or authorize others to
use or display, the trademarks, copyrights or proprietary rights of Licensor in
connection with any advertising, assembly, manufacture, distribution, use, sale
or lease of any goods, other than in connection with the manufacture and sale of
the Licensed Products; and
(d) subject to Licensee's best business judgment
Licensee will exercise reasonable efforts to: (i) manufacture sufficient
quantities of the Licensed Product to meet the market demand for same; (ii)
conduct advertising activities to promote the sale of Licensed Product; and
(iii) make any and all arrangements necessary to accomplish such undertakings.
10. MATERIALS.
10.1. Notwithstanding anything contained herein to
the contrary and subject to the terms of this Agreement, all artwork, designs
and computer software embodying the Licensed Property, or any reproduction
thereof, or any packaging or advertising materials, which are designed,
developed and/or created by Licensee hereunder (or any of its sublicensees,
affiliates or subsidiaries), shall be, and remain Licensor's sole and exclusive
property, inclusive of all copyrights and right to
17
<PAGE> 52
copyright therein and thereto for the life of the copyright therein; provided
that during the term of this Agreement, Licensee shall have the exclusive right,
license and privilege (without any compensation to Licensor except as provided
in Section 5) to use all such above described materials in connection with its
exploitation, sale and distribution of the Licensed Products.
10.2. Licensor shall make available to Licensee, at
Licensor's actual out of pocket cost, any artwork relating to the Licensed
Property which Licensor owns and which is reasonably available to Licensor for
Licensee's use in connection with the exploitation of the Licensed Property.
11. TRANSLATIONS.
In the event that Licensee shall reasonably require
the text associated with any Licensed Product to be translated into a language
other than English, Licensor shall, upon request, provide to Licensee the text
files and the text that appears in bit map files and printed copies of the
script used for audio components of CD-ROM and cartridge versions only of the
Licensed Product and Licensee shall produce, at its own expense, a translation
text thereof and audio track therefor. Licensor shall then cause a new Master
Disk containing such translation and audio track to be encoded and delivered to
Licensee, at Licensor's own expense with respect to the CD-ROM version only and
at Licensee's expense with respect to the cartridge version, provided, however,
that Licensee shall bear the cost of encoding new Master Disks containing
translations into languages other than French, German, Chinese, Portuguese,
Spanish and Italian. Licensee shall also bear the cost of inserting audio tracks
on Home Video Game cartridges.
12. REPRESENTATIONS AND WARRANTIES.
12.1. Licensor hereby represents and warrants that
this Agreement has been duly authorized, executed and delivered by Licensor;
Licensor has the full power and authority to enter into this Agreement and
perform its obligations hereunder; this Agreement constitutes the valid and
binding obligation of Licensor, enforceable in accordance with its terms; the
making of this Agreement does
18
<PAGE> 53
not violate any agreement, right or obligation existing between Licensor and any
other person, firm or corporation; and the Licensed Property, if used pursuant
to the license granted herein, will not infringe upon or violate any rights of
any third party.
12.2. Licensee hereby represents and warrants that
this Agreement has been duly authorized, executed and delivered by Licensee;
Licensee has the full power and authority to enter into and perform its
obligations hereunder; this Agreement constitutes the valid and binding
obligation of Licensee, enforceable in accordance with its terms; the making of
this Agreement does not violate any agreement, right or obligation existing
between Licensee and any other person, firm or corporation; its manufacture,
advertisement, distribution and sale of the Licensed Products will be in
accordance with the terms of this Agreement and will not infringe upon or
violate any rights of any third party. Licensee shall have obtained all
necessary licenses for the sale of the Licensed Products within the Licensed
Territory from Nintendo(R), Sega(R), Sony(R) or any other manufacturer of
Designated Consumer Game Platforms.
13. INDEMNIFICATION.
13.1. Each party agrees to indemnify and hold the
other (including officers, directors, agents and employees of such party or its
subsidiaries, affiliates and sublicensees) harmless against any loss, damage,
expense or cost (including reasonable attorneys' fees) arising out of any claim,
demand or suit or judgment resulting from any breach of any warranty or
representation set forth in Section 12 above. Each party shall promptly inform
the other of any such claim, demand, suit or judgment.
13.2. In connection with any such claim, demand or
suit referred to above, the party so indemnifying (the "Indemnitor") agrees to
defend, contest or otherwise protect the indemnified party (the "Indemnitee")
against any such suit, action, investigation, claim or proceeding at the
19
<PAGE> 54
Indemnitor's own cost and expense. The Indemnitee shall have the right, but not
the obligation to participate, at its own expense, in the defense thereof by
counsel of its own choice. In the event that the Indemnitor fails timely to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding, the Indemnitee shall have the right to
defend, contest or otherwise protect against the same, and, upon ten (10) days'
written notice to the Indemnitor, make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnitor, including without
limitation, reasonable attorneys' fees, disbursements and all reasonable amount
applied as a result of such suit, action, investigation, claim or proceeding or
compromise or settlement thereof. The obligations hereunder shall survive the
termination or expiration of this Agreement.
13.3. Neither Licensor nor Licensee shall be liable
for any incidental, consequential or punitive damages to the other.
14. EVENTS OF DEFAULT AND TERMINATION.
Licensee shall be deemed to be in default of this
Agreement in the event either of the following occurs:
(a) Licensee fails to make any payment or
furnish any statement in accordance herewith, provided that Licensee shall have
been given a first written notice of such default and a period of at least
fifteen (15) days in which to cure such default and, if such default shall not
have been cured within such period, Licensee shall have been given a second
written notice of such default and a further period of at least ten (10) days in
which to cure such default; or
(b) Licensee fails after thirty (30) days'
written notice to Licensee to comply with any other of Licensee's obligations
hereunder.
20
<PAGE> 55
15. EXPIRATION OR TERMINATION OF AGREEMENT.
Upon expiration or termination of this Agreement, all rights
granted to Licensee herein shall forthwith revert to Licensor with the following
consequences:
(a) All unpaid Royalties shall be due and payable in
accordance with Section 6.1 hereof.
(b) Licensor shall thereafter be free to license others
to use the Licensed Property in connection with the manufacture, advertisement,
distribution and sale of items identical or similar to the Licensed Products in
the Licensed Territory.
(c) In the event of termination or expiration of this
Agreement, other than a termination by Licensor as a result of a material breach
of this Agreement by Licensee, Licensee may continue to sell for a period of one
hundred eighty (180) days after the effective date of termination all approved
copies of the units of the Licensed Product produced prior thereto.
16. CONFIDENTIAL INFORMATION .
Each of the parties shall keep in confidence and not disclose
or make available to any third party, without the written permission of the
other party, the terms of this Agreement and the proprietary information of the
other party made known to it under this Agreement, including without limitation
any information with respect to Proposed Games prior to the date on which they
are First Released and any Master Disk or version thereof. This requirement of
confidentiality shall not apply to information that is (a) in the public domain
through no wrongful act of the disclosing party; (b) rightfully received by the
disclosing party from a third party who is not bound by a restriction of
nondisclosure; (c) already in the disclosing party's possession without
restriction as to disclosure; or (d) is required to be disclosed by applicable
rules and regulations of government agencies or judicial bodies. This obligation
of confidentiality: (i) shall survive termination of this Agreement and (ii)
shall extend to any subcontractor of either party and each party agrees to
obtain from each such subcontractor
21
<PAGE> 56
a written agreement to abide by the foregoing confidentiality requirements. Each
of the parties shall be entitled to seek injunctive or equitable relief to
prevent the breach or threatened breach by the other of the provisions of this
Section and to secure its enforcement.
17. NOTICES.
Any notice, consent, approval, request, waiver or statement to
be given, made or provided for under this Agreement shall be in writing
and deemed to have been duly given (i) by its delivery personally or by
express mail; or (ii) five (5) days after its being mailed, air express,
registered or certified, return receipt requested in a United States Post
Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 951-3107
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 951-3052
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 951-2379
Facsimile Number: (212) 679-6850
TO LICENSOR: WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
22
<PAGE> 57
WITH A COPY TO: Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
WITH A COPY TO: Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
or such other address as either party may designate by notice given as
aforesaid.
18. MISCELLANEOUS .
18.1. This Agreement is personal to Licensee as one party and
Licensor as the other party. Neither this Agreement nor any party's rights under
it may be assigned, in whole or in part, nor may Licensee's or Licensor's rights
or obligations hereunder be delegated, in whole or in part, to any person or
party without the prior written consent of the other party, except that any
party may assign its rights and delegate obligations to any of its direct or
indirect wholly-owned subsidiaries or affiliates or to any person, firm or
corporation owning or acquiring all or substantially all of the stock or assets
of that party, as long as that party remains fully liable for its obligations
hereunder. Any sale of all or substantially all of the assets of Licensor shall
include a requirement for the assumption by the purchaser of all covenants,
obligations and duties undertaken by the seller pursuant to the terms of this
Agreement, including its obligations with respect to Games and the intellectual
property from which
23
<PAGE> 58
they are derived. This Agreement shall bind the parties, their successors and
permitted assignees and delegees. Licensor as one party, and Licensee as the
other party, are each liable for their respective obligations under the terms of
this Agreement.
18.2. The entire understanding between the parties hereto
relating to the subject matter hereof is contained herein. This Agreement cannot
be changed, modified, amended or terminated except by an instrument in writing
executed by the parties hereto.
18.3. 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 no waiver shall be
deemed or construed to be a waiver of such terms or conditions for the future or
any subsequent breach thereof.
18.4. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between Licensor and
Licensee, and neither Licensor nor Licensee 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.
18.5. This Agreement shall be governed by the laws of the
State of Illinois applicable to contracts made and to be wholly performed in the
State of Illinois.
18.6. 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, either such provision will be deemed amended to
conform to such laws or regulations without materially altering the intention of
the parties or it shall be stricken and the remainder of this Agreement shall
remain in full force and effect.
18.7. This Agreement may be executed in counterparts each of
which shall be deemed an original and when taken together shall be deemed one
and the same document.
24
<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
[WILLIAMS ELECTRONICS GAMES, INC.]
By:__________________________________
[MIDWAY MANUFACTURING COMPANY]
By:__________________________________
[WILLIAMS ENTERTAINMENT INC.]
By:__________________________________
GT INTERACTIVE SOFTWARE CORP.
By:__________________________________
25
<PAGE> 60
SCHEDULE A
[Description of Licensed Property as Set Forth in New Game Option Notice]
<PAGE> 61
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
SCHEDULE B
ROYALTIES
Licensee shall pay to Licensor royalties ("Royalties") computed as
follows: (a) with respect to Licensed Products which are subject to any
Third Party Fees and Royalties, an amount equal to the greater of (i) * of the
actual Net Wholesale Sales Price for each unit sold and not returned, or (ii) *
of Licensee's average Net Wholesale Sales Price for Front-line Home Video Games
designed for play on the same Designated Consumer Game Platform sold at Full
Price and not returned during the relevant Royalty Period; and (b) with respect
to Licensed Products which are not subject to any Third Party Fees and
Royalties, an amount equal to the greater of (i) * of the actual Net Wholesale
Sales Price for each unit sold and not returned, or (ii) * of Licensee's average
Net Wholesale Sales Price for Front-line Home Video Games designed for play on
the same Designated Consumer Game Platform sold at Full Price and not returned
during the relevant Royalty Period. The Royalty computed in accordance with
clauses (a)(ii) and (b)(ii) of the preceding sentence shall apply (A) for a
period of one year from the date of First Release of the Licensed Product by
Licensee or its affiliates in each Marketing Area with respect to Home Video
Games released during the first two (2) years of the Initial Option Period, and
(B) for a period of six (6) months from the date of First Release of the
Licensed Product by Licensee or its affiliates in each Marketing Area with
respect to Home Video Games released after the first two (2) years of the
Initial Option Period. For purposes of this paragraph, a Licensed Product shall
be deemed "Front-line" if it is substantially equivalent to a Home Video Game
which has been released at a premium price by Licensor or its licensees in the
United States. Royalties for Licensed Products which are not deemed Front-line
products shall be calculated as provided in clauses (a)(i) or (b)(i) of the
first sentence of this paragraph. Solely for purposes of computing Royalties in
accordance with the first sentence of this paragraph, Licensed Products shall
not be deemed to be subject to any Third Party Fees and Royalties if they are
subject only to (x) de minimis Third Party Fees and Royalties excluding
developer royalties amounting to less than * in the aggregate of the Net
Wholesale Sales Price, or (y) royalties and other participations payable to
developers for services rendered in connection with the Licensed Product. In no
event shall the Royalty with respect to the sale of a Licensed Product at any
time be less than the Third Party Fees and Royalties (including royalties and
other participations payable to developers) payable with respect to such
Licensed Product.
Notwithstanding the foregoing, if at least twelve (12) months after the
date of the initial release by Licensee (the "First Foreign Sale") of a Licensed
Product subject to Third Party Fees and Royalties in each Marketing Area, the
Net Wholesale Sales Price of such Licensed Product has been reduced from the
original list price to the equivalent of (U.S.) * or less, then Licensee may
elect to pay to Licensor in lieu of the Royalty payable in accordance with the
first sentence of this Schedule B, an alternative royalty (the "Alternative
Royalty") equal to the greater of (i)
<PAGE> 62
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
* of the Net Wholesale Sales Price of such Licensed Product, plus an amount
equal to * of all Third Party Fees and Royalties payable with respect to the
sale of such Licensed Product or (ii) * of the Net Wholesale Sales Price of such
Licensed Product.
If at any time after March 31, 1995 or, with respect to new Designated
Consumer Game Platforms which are introduced subsequent to the date hereof, the
date on which such new Designated Consumer Game Platform is introduced, there
shall occur (a) a reduction in the standard platform royalties payable by
Licensee to Nintendo(R), Sega(R), Sony(R), or any other Designated Consumer Game
Platform manufacturer with respect to the Licensed Products, or (b) a reduction
in landed unit manufacturing costs payable by Licensee to any Game manufacturer,
including, without limitation, any such reductions in platform royalties or unit
manufacturing costs which may result from reaching applicable volume discount
levels established by the Designated Consumer Game Platform manufacturer or
other Game manufacturer, then, in either or both such cases, Licensee shall pay
to Licensor, in addition to any Royalty otherwise payable hereunder, an amount
equal to * of the amount by which such platform royalty and landed manufacturing
costs have been reduced for each unit of Licensed Product sold by Licensee. Such
additional amounts shall be payable by Licensee to Licensor at the time and in
the manner specified in Section 6 above. Notwithstanding the foregoing, however,
Licensee shall not be required to pay to Licensor any such additional amounts
based on reductions in platform royalties and landed unit manufacturing costs
payable in respect of Licensed Products for the Sega Saturn and Sony PSX
platforms unless and until such platform royalties and landed unit manufacturing
costs shall fall below * Dollars per unit, and, in such cases, Licensee shall
only be required to pay 50% of the reduction in costs below * Dollars, as
provided above.
All payments of Royalties by Licensee to Licensor hereunder shall
either be paid from Licensee's office in the United States or from Licensee's
office in the United Kingdom. Licensee shall be solely responsible for payment
of, and shall timely file and remit, any foreign taxes (including any foreign
taxes on Royalties required to be withheld at the source) related to this
Agreement. Licensee shall promptly assist Licensor as necessary in obtaining a
United Kingdom royalty tax withholding exemption, or with any other
documentation required concerning Licensee's operations outside the United
States. If taxes on Royalties payable hereunder imposed by any foreign
jurisdiction are required to be withheld at the source, Licensee shall remit
such Royalties net of any withholding taxes together with all appropriate
documentation and reporting forms.
The "Net Wholesale Sales Price" of Licensed Products shall be the price
invoiced to customers, less any price discounts, rebates or credits granted at
the time of sale and taxes invoiced to customers (including VAT). No deduction
shall be made for bad debts or other uncollected amounts, advertising
allowances, including cooperative advertising, or any other costs incurred in
manufacturing, selling or distributing the Licensed Products.
2
<PAGE> 63
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
ADJUSTMENTS TO ROYALTIES
Anything above to the contrary notwithstanding:
1. In cases where Licensed Products are sold by non-affiliated third
party sublicensees under sublicenses granted by Licensee in accordance with the
provisions of Section 2.1 above, Royalties shall be payable by Licensee to
Licensor hereunder equal to the sum of (a) an amount equal to all Third Party
Fees and Royalties payable with respect to the sale of such Licensed Products,
plus (b) * of the proceeds received by Licensee from such sublicensee after
deducting (i) a fee to Licensee equal to * of such net proceeds, (ii) an amount
equal to all Third Party Fees and Royalties, and, (iii) in the case of
non-affiliated third party sublicensees to whom Licensee supplies the Licensed
Product, Licensee's direct manufacturing and shipping costs. In no event shall
the Royalty be less than such Third Party Fees and Royalties.
2. If Licensee's Weighted Average Gross Profits as a percentage of
sales of Accepted Games under this Agreement and all Other Home Video Game
Distribution and License Agreements other than Games with respect to which an
Alternative Royalty is payable, for the twelve (12) months ending June 30, 1997
are less than Licensee's Weighted Average Gross Profits as a percentage of sales
of Accepted Games under this Agreement and all Other Home Video Game
Distribution and License Agreements other than Games with respect to which an
Alternative Royalty is payable, for the twelve (12) months ending December 31,
2000, then the Royalties otherwise payable by Licensee under this Agreement and
all Other Home Video Game Distribution and License Agreements for the first
Renewal Option Year (ending June 30, 2002), if any, shall be increased, as a
percentage of Net Wholesale Sales Price, for each unit sold and not returned, by
an amount equal to * of the difference. If Licensee's Weighted Average Gross
Profits as a percentage of sales of Accepted Games under this Agreement and all
Other Home Video Game Distribution and License Agreements during the 12 months
ended December 31, 2001, or any subsequent 12-month period during the Renewal
Option Period, shall be greater or less than Licensee's Weighted Average Gross
Profits as a percentage of sales of Accepted Games during the preceding 12-month
period, then the Royalties otherwise payable by Licensee under this Agreement
and all Other Home Video Game Distribution and License Agreements shall be
similarly increased or decreased for the next Renewal Option Year by an amount
equal to * of the difference, but in no event shall Royalties payable by
Licensor under this Agreement and all Other Home Video Game Distribution and
License Agreements be reduced at any time to an amount less than the amounts set
forth in the first sentence of this Schedule B. For purposes hereof, Licensee's
"Weighted Average Gross Profits" with respect
3
<PAGE> 64
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to the sale of Accepted Games under this Agreement and all Other Home Video Game
License Agreements shall mean the weighted average, computed on a platform by
platform basis, of (a) aggregate sales of Accepted Games other than Games with
respect to which an Alternative Royalty is payable, less (b) landed
manufacturing costs and platform royalties paid or payable with respect to such
Accepted Games. Any amounts actually paid or payable to Licensor by Licensee as
additional Royalties hereunder by reason of a reduction in platform royalties or
landed unit manufacturing costs, as provided above (including without limitation
any such amounts paid or payable by reason of a reduction in platform royalties
or landed unit manufacturing costs of Licensed Products for the Sega Saturn or
Sony PSX platforms below * Dollars per unit), shall be added back in determining
Weighted Average Gross Profits hereunder. For example, if Licensee's Weighted
Average Gross Profits as a percentage of sales of Accepted Games during the
twelve (12) months ended by June 30, 1997 are *, and Licensee's Weighted Average
Gross Profits during the twelve months ending December 31, 2000 are * of sales
of Accepted Games, then the Royalty otherwise payable by Licensee to Licensor as
a percentage of Net Wholesale Sales Price during the first Renewal Option Year
(ending June 30, 2002) shall be increased by * of the difference, or *.
3. If the Licensed Product shall incorporate Computer Software in the
form of a cartridge, as opposed to a CD-ROM disk or other device containing the
computer game code (a "Cartridge-Based Product"), Licensee may elect to adjust
the Royalties otherwise payable with respect to sales of such Cartridge-Based
Product in a Marketing Area as follows: The "Cartridge Margin" for such
Cartridge-Based Product shall be calculated by subtracting from * the sum of (i)
the applicable percentage Royalty with respect to sales of such Cartridge-Based
Product, determined in accordance with the first sentence of this Schedule B
above, and (ii) the landed unit cost of such Cartridge-Based Product, stated as
a percentage of the Net Wholesale Sales Price therefor. If the Cartridge Margin
is less than the applicable percentage Royalty otherwise payable on sales of
such Cartridge-Based Products, the applicable percentage Royalty shall be
reduced by an amount equal to * of the difference between such percentage
Royalty and the Cartridge Margin, provided, however, that in no event shall the
Royalty payable with respect to sales of Cartridge-Based Products be less than
the Third Party Fees and Royalties payable with respect thereto.
For example, if the Royalty percentage rate determined in
accordance with the first sentence of this Schedule B is * for a Cartridge-Based
Product having a Net Wholesale Sales Price in a given Marketing Area of *
Dollars and a landed unit cost of * Dollars (i.e., * of Net Wholesale Sales
Price), the Cartridge Margin for such Cartridge-Based Product would be *. Since
the Cartridge Margin * is less than the applicable percentage Royalty *, the
applicable percentage Royalty shall be reduced by one-half of the difference, or
*, such that the adjusted Royalty percentage payable on sales of such
Cartridge-Based Product in the Marketing Area will be *.
4
<PAGE> 65
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
RECOUPMENT.
Licensee shall be entitled to apply the aggregate amount by which (a)
Royalties earned and otherwise payable under this Agreement exceed (b) * of the
amount of any Third Party Fees and Royalties payable by Licensor to parties
having rights with respect to the sale of Licensed Products (the "Recoupable
Amount"), to recoup the * Dollar Guaranteed Advance Royalty paid by Licensee to
WMS Industries Inc. pursuant to Section 3 of the GTIS Master Agreement, until
such Recoupable Amount together with the Recoupable Amounts actually paid by
Licensee under any other Home Video Game Distribution and License Agreement
entered into by Licensee pursuant to the GTIS Master Agreement ("Other Home
Video Game Distribution and License Agreements") equal * Dollars; provided,
however, that (i) to the extent that the aggregate of all Recoupable Amounts
applied or accrued under this Agreement and the Other Home Video Game
Distribution and License Agreements between March 31, 1995 and March 31, 1996
exceeds the installment of the Guaranteed Advance Royalty paid on March 31,
1995, such excess shall be paid to Licensor and the licensors under the Other
Home Video Game Distribution and License Agreements, in accordance with their
respective interests, and applied in reduction of the installment of the
Guaranteed Advance Royalty payable under the GTIS Master Agreement on March 31,
1997, up to a maximum reduction of * Dollars, and the balance of such excess, if
any, shall be applied first in reduction of the installment of the Guaranteed
Advance Royalty payable on March 31, 1996, and then in reduction of the
installment of the Guaranteed Advance Royalty payable on March 31, 1997, and
(ii) to the extent that the aggregate of all Recoupable Amounts applied or
accrued under this Agreement and all Other Home Video Game Distribution and
License Agreements between March 31, 1995 and March 31, 1997 exceed the
unrecouped portion of the installments of the Guaranteed Advance Royalty paid on
March 31, 1995 and March 31, 1996, the excess shall be paid to Licensor and the
licensors under the Other Home Video Game Distribution and License Agreements,
in accordance with their respective interests, and applied in reduction of the
installment of the Guaranteed Advance Royalty payable on March 31, 1997.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
Licensee shall be permitted to distribute free and promotional goods
without the payment of any Royalties or other royalties thereon, subject to the
provisions of Section 1 above and within the following territorial and quantity
limits:
United Kingdom,
Germany, Scandinavia,
Benelux, Italy, Spain, and
Australia: * units per country
Other Countries: * units per country
5
<PAGE> 66
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
No Royalties shall be payable by Licensee to Licensor in excess of any
Third Party Fees and Royalties in connection with the sale by Licensee of
"close-outs." For purposes hereof, "close-outs" shall mean any Licensed Products
that are sold for a price no greater than the sum of direct manufacturing and
shipping costs plus platform royalties and any Third Party Fees and Royalties.
6
<PAGE> 67
SCHEDULE C
MARKETING AREAS
The following countries or related groups of countries shall each be
deemed a single Marketing Area:
United Kingdom and Ireland*
France*
Germany, Switzerland and Austria*
Benelux*
Spain and Portugal*
Italy*
Scandinavia
Former Eastern Bloc and the Baltic States (Latvia, Lithuania, Estonia)
Russia and Rest of the CIS
Rest of Europe (including Turkey)
Africa
Middle East
India and Pakistan
China (PRC excluding Hong Kong and Macao)*
Rest of Asia
Australia and New Zealand
Brazil
Rest of South and Central America and the Caribbean
- ---------------------
* Denotes Key Marketing Area
<PAGE> 68
EXHIBIT B
Forms of Warrant and Registration Rights Agreement
<PAGE> 69
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
NOR ANY SHARES ACQUIRED UPON THE EXERCISE OF SUCH WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY OTHER SECURITIES LAWS, NOR MAY SUCH WARRANTS OR
SHARES BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT OR OTHER LAWS. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED
IN THIS WARRANT.
AS USED HEREIN, THE TERM "COMMON STOCK" SHALL MEAN THE CLASS OF COMMON
STOCK ISSUED AND SOLD BY THE COMPANY PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN
AN INITIAL PUBLIC OFFERING.
GT INTERACTIVE SOFTWARE CORP.
Common Stock Purchase Warrant
No. _____ _________ Warrants
NOT EXERCISABLE AFTER THE DATES SPECIFIED HEREIN
THIS WARRANT CERTIFICATE CERTIFIES THAT WMS Industries Inc.,
or registered assigns, is the registered holder of the number of warrants set
forth above, each of which entitles such holder hereof, subject to the terms,
provisions and conditions set forth herein, to purchase from the Company at any
time prior to [5 years from the date such Warrants become exercisable] at the
principal office of the Company or such other location designated by the Company
in accordance with the terms set forth herein, one fully paid and nonassessable
share of the Common Stock of the Company, no par value per share ("Common
Stock"), at the initial purchase price of $_________ per share [IPO Price], upon
presentation and surrender of this Warrant Certificate with the Form of Election
to Purchase on the reverse side hereof duly executed and payment in full (in
cash or by certified or official bank or bank cashier's check payable to the
order of the Company) of the applicable Purchase Price as to which the
Warrant(s) represented by the Warrant Certificate are exercised, all subject to
the terms, provisions and conditions hereof; provided, however, that the holder
hereof shall have the right, at its election, in lieu of paying the Purchase
Price in cash or by certified or official bank or bank cashier's check as
described above, to instruct the Company, in the Form of Election to Purchase,
to retain, in payment of the Purchase Price, a number of shares of Common Stock
(the "Payment Shares") equal to the quotient obtained by dividing (x) the
aggregate Purchase Price of the shares as to which the Warrants represented by
this Certificate are being exercised by (y) the current market price per share
(as defined in Section 8(d) below), and to deduct the number of Payment Shares
from the shares to be delivered to the holder hereof. The number
<PAGE> 70
of Warrants evidenced by this Warrant Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are as of _________ __, 199_. The Warrants
represented by this Certificate are being issued pursuant to the terms of the
GTIS Master Option and License Agreement (Home Video Games), dated March 31,
1995, by and between WMS Industries Inc. and the Company.
The rights of the holder of this Warrant shall be subject to
the following further terms and conditions:
SECTION I. Exercise of Warrants; Purchase Price.
(1) Subject to the provisions of Section 6(d) hereof, the
registered holder of this Warrant Certificate may exercise the Warrants
evidenced hereby, in whole or in part, as follows: (i)___ Warrants exercisable
for ____ shares of Common Stock (1/3 of total shares represented by Warrant) may
be exercised on or after (x) March 31, 1996 or (y)______ __, 199_ (6 months
after the date of the IPO), whichever is later; (ii) ___ Warrants exercisable
for ___ shares of Common Stock (1/3 of total shares represented by Warrant) may
be exercised on or after (x) March 31, 1997 or (y)_______ __, 199_ (6 months
after the date of the IPO), whichever is later; and (iii) ___ Warrants
exercisable for __ shares of Common Stock (1/3 of total shares represented by
Warrant) may be exercised on or after (x) March 31, 1998 or (y) _________ __,
199_ (6 months after the date of the IPO), whichever is later. The Warrants
referred to in (a)(i) above are exercisable until 4:00 p.m., New York City time,
on [five years from the date such Warrants become exercisable]; the Warrants
referred to in (a)(ii) above are exercisable until 4:00 p.m., New York City
time, on [five years from the date such Warrants become exercisable]; and the
Warrants referred to in (a)(iii) above are exercisable until 4:00 p.m., New York
City time, on [five years from the date such Warrants become exercisable] (each
a "Final Expiration Date"), upon surrender of this Warrant Certificate, with the
Form of Election to Purchase on the reverse side hereof duly executed, to the
Company at its office maintained pursuant to Section 2(b) hereof, together with
payment of the Purchase Price for each share of Common Stock as to which the
Warrants are exercised. Each warrant not exercised prior to 4:00 p.m., New York
City time, on the applicable Final Expiration Date shall become void and all
rights thereunder shall cease as of such time.
(2) The purchase price for each share of Common Stock pursuant
to the exercise of a Warrant shall be $_______ [IPO Price] (the "Purchase
Price"); provided, however, that the Purchase Price shall be subject to
adjustment from time to time as provided in Section 8 hereof. The aggregate
Purchase Price shall be payable in cash or by certified or official bank or bank
cashier's check payable to the order of the Company, or by any other means
consented to by the Company.
(3) Upon receipt of this Warrant Certificate representing
exercisable Warrants, with the Form of Election to Purchase duly executed,
accompanied by payment of the aggregate Purchase Price for the shares to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder of this Warrant Certificate in accordance with Section 6 hereof,
3
<PAGE> 71
the Company shall thereupon promptly (i) cause to be issued to the holder hereof
the Common Stock certificates for the number of whole shares of Common Stock to
be purchased and (ii) when appropriate, pay to the registered holder hereof, in
lieu of the issuance of fractional shares to which such holder would otherwise
be entitled, an amount in cash in accordance with Section 11 hereof.
(4) If the registered holder of this Warrant Certificate shall
exercise less than all the Warrants evidenced hereby, a new Warrant Certificate
evidencing Warrants equivalent to the Warrants remaining unexercised shall be
issued by the Company to the registered holder of this Warrant Certificate or to
his duly authorized assigns, subject to the provisions of Section 11 hereof.
SECTION II. Split Up, Combination and Exchange of Warrant
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
(1) Subject to the provisions of Section 11 hereof, at or
prior to the Final Expiration Date this Warrant Certificate, with or without
other Warrant Certificates, may be split up, combined or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the registered holder to
purchase a like number of shares of Common Stock as the Warrant Certificate or
Warrant Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to split up, combine or exchange this Warrant
Certificate shall make such request in writing delivered to the Company, and
shall surrender the Warrant Certificate or Warrant Certificates to be split up,
combined or exchanged at the office of the Company maintained for such purpose
as set forth below. Thereupon the Company shall sign and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
split-up, combination or exchange of Warrant Certificates.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of a Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificate if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor to the registered owner in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
(2) The Company will maintain an office (which may be an
agency maintained at a bank) in the City of New York in the State of New York
where notices, presentations and demands in respect of any Warrants may be made
upon it and where it will maintain the Warrant register upon which transfers and
exchanges of Warrants shall be recorded. Such office shall be maintained at GT
Interactive Software Corp., 16 East 40th Street, New York, New York 10016, until
such time as the Company shall notify the holders of the Warrants of any change
of location of such office.
4
<PAGE> 72
SECTION III. Subsequent Issue of Warrant Certificates.
Subsequent to their original issuance, no Warrant Certificates shall be issued
except (a) Warrant Certificates issued upon any transfer, combination, split-up
or exchange of Warrants pursuant to the terms, conditions and provisions hereof,
(b) Warrant Certificates issued in replacement of mutilated, destroyed, lost or
stolen Warrant Certificates pursuant to Section 2 hereof, (c) Warrant
Certificates issued pursuant to Section 1(d) hereof upon the partial exercise of
any Warrant Certificate to evidence the unexercised portion of such Warrant
Certificate, (d) Warrant Certificates issued pursuant to Section 8(i) hereof and
(e) Warrant Certificates issued pursuant to Section 14 hereof.
SECTION IV. Cancellation and Destruction of Warrant
Certificates. All Warrant Certificates surrendered for the purpose of exercise,
exchange, substitution, transfer, split-up or combination shall be cancelled by
the Company, and no Warrant Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Warrant Certificate. The
Company shall cancel and retire any other Warrant Certificates purchased or
acquired by the Company otherwise than upon the exercise thereof.
SECTION V. Ownership; Restrictions on Transfer; Registration
of Transfers.
(1) Except as otherwise permitted by this Section 5, each
Warrant Certificate (including each Warrant Certificate issued upon the transfer
of such Warrant Certificate) shall be stamped or otherwise imprinted with
legends in substantially the following form:
"Neither the Warrants represented by this Warrant Certificate
nor any shares acquired upon the exercise of such Warrants
have been registered under the Securities Act of 1933, as
amended or any other securities laws nor may such Warrants or
shares be transferred, sold or otherwise disposed of in the
absence of such registration or an exemption therefrom under
such act or other laws. This Warrant and such shares may be
transferred only in compliance with the conditions specified
in this Warrant.
(2) Except as otherwise permitted by this Section 5, each
certificate for Common Stock (or other securities) issued upon the exercise of
this Warrant, and each certificate issued upon the transfer of any such Common
Stock (or other securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as amended
or any other securities laws and may not be transferred, sold
or otherwise disposed of in the absence of such registration
or an exemption therefrom under such Act or other laws. Such
shares may be
5
<PAGE> 73
transferred, sold or otherwise disposed of only in compliance
with the conditions specified in the Common Stock Purchase
Warrants issued by GT Interactive Software Corp. A complete
and correct copy of the form of such Warrant is available for
inspection at the principal office of GT Interactive Software
Corp. or at the office or agency maintained by GT Interactive
Software Corp. as provided in such Warrants and will be
furnished to the holder of such shares upon written request
and without charge."
(3) Prior to any transfer of any Warrant Certificate that is
not registered under an effective registration statement under the Securities
Act of 1933 (the "Securities Act"), the holder thereof will give written notice
to the Company of such holder's intention to effect such transfer and to comply
in all other respects with this Section 5. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail to enable
counsel to render the opinion referred to below
If, in the opinion of counsel for the Company, the proposed
transfer may not be legally effected without registration of such Warrants under
the Securities Act, the Company will promptly so notify the holder thereof and
thereafter such holder shall not be entitled to transfer such Warrant until
either (x) receipt by the Company of a further notice from such holder pursuant
to the foregoing provisions of this Section 5 and fulfillment of the provisions
of this Section 5 or (y) such Warrants have been effectively registered under
the Securities Act.
If, in the opinion of counsel for the Company, the proposed
transfer may be effected without registration of such Warrants under the
Securities Act, such holder shall thereupon be entitled to transfer such
securities in accordance with the terms of the notice delivered by such holder
to the Company. Each Warrant Certificate issued upon or in connection with such
transfer shall bear the restrictive legends required by this Section 5, unless
in the opinion of such counsel, such restrictive legends are not required or
advisable.
(4) The restrictions imposed by this Section 5 upon the
transferability of the Warrants relating to the registration of securities under
the Securities Act set forth in clauses (b) and (c) of this Section 5 shall
terminate as to any particular Warrants, (x) when such securities shall have
been effectively registered and sold or distributed under the Securities Act,
(y) when, in the opinion of both counsel for the Company and the holder (each of
whom shall be experienced in securities law matters), any restrictions cease or
are permitted to terminate under applicable securities law, or (z) when, in the
opinion of counsel for the Company (who shall be experienced in securities law
matters), such restrictions are no longer required in order to insure compliance
with the Securities Act or any other applicable securities law, whichever is
earliest. Whenever any such restrictions shall cease and terminate as to any
Warrants, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new Warrants of
like tenor not bearing the applicable legends previously required by this
Section 5.
6
<PAGE> 74
SECTION VI. Reservation and Availability of Shares of Common
Stock.
(1) The Company will cause to be reserved and kept available
out of its authorized and unissued shares of Common Stock or its authorized and
issued shares of Common Stock held in its treasury, the number of shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants. The transfer agent for the Common Stock, if any, will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Warrant on file with each transfer agent. The Company will furnish
the transfer agent a copy of all notices of adjustments and certificates related
thereto, transmitted to each holder of a Warrant Certificate pursuant to Section
8 hereof.
(2) So long as the Common Stock issuable upon the exercise of
Warrants may be listed on any national securities exchange or the NASDAQ Stock
Market, the Company shall use its best efforts to cause all shares reserved for
such issuance to be listed as expeditiously as possible on such exchange upon
official notice of issuance upon such exercise.
(3) The Company will take all such action as may be necessary
to ensure that all shares of Common Stock delivered upon exercise of Warrants
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(4) The Company will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the initial issuance or delivery of this Warrant Certificate or of the issuance
and delivery of any shares of Common Stock upon the exercise of Warrants, except
as set forth in the immediately following sentence. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer or delivery of this Warrant Certificate to a person other than, or the
issuance or delivery of certificates for Common Stock in a name other than that
of, the registered holder of the Warrant Certificate evidencing Warrants
surrendered for exercise or to issue or deliver any certificates for shares of
Common Stock upon the exercise of any Warrants until any such tax shall have
been paid (any such tax being payable by the holder of such Warrant Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION VII. Common Stock Record Date. Each person in whose
name any certificate for shares of Common Stock is issued upon the exercise of
Warrants shall for all purposes be deemed to have become the holder of record of
the Common Stock represented thereby on, and such certificate shall be dated,
the close of business on the date upon which the Warrant Certificate evidencing
such Warrants was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on,
7
<PAGE> 75
and such certificate shall be dated, the opening of business on the next
succeeding business day on which the Common Stock transfer books of the Company
are open.
SECTION VIII. Adjustment of Purchase Price, Number of Shares
or Number of Warrants. The Purchase Price, the number of shares of Common Stock
covered by each Warrant and the number of Warrants outstanding are subject to
adjustment from time to time as provided in this Section 8.
(1) In case the Company shall at any time after the
date hereof, (i) effect a distribution to all holders of its
outstanding Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares of
Common Stock or (iv) issue any securities of the Company in a
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving
corporation other than a consolidation or merger in respect of
which an adjustment is made pursuant to Section 10 hereof),
the number and kind of securities issuable commencing on the
record date for such distribution or the effective date of
such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any Warrant
exercised after such time shall be entitled to receive upon
exercise of the Warrant the aggregate number and kind of
securities which, if such Warrant had been exercised
immediately prior to such date and at a time when the Common
Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by
virtue of such distribution, subdivision, combination or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. Notwithstanding
the foregoing, if a warrant is exercised subsequent to the
record date, if any, but prior to the relevant distribution
date or payment date, the Company shall not be required to
make any such payment or distribution pursuant to this
subsection (a) to the holder of such warrant prior to such
payment or distribution date, but shall make such payment or
distribution on such date.
(2) In case the Company shall fix a record date for
making a distribution to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or
purchase Common Stock at a price per share of Common Stock
less than the then current market price per share (as defined
in Section 8(d) hereof) of Common Stock on such record date,
the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of
shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock so to be
8
<PAGE> 76
offered for subscription or purchase would purchase at the
current market price per share and the denominator of which
shall be the number of shares of Common Stock outstanding on
such record date plus the maximum number of additional shares
of Common Stock to be offered for subscription or purchase.
In the case of a distribution by the Company to all
holders of Common Stock of rights, options or warrants
entitling them to subscribe for or purchase securities
convertible into, exchangeable for or carrying a right to
purchase Common Stock (such securities being referred to
herein as "Convertible Securities"), for purposes of this
Section 8(b), (i) such distribution shall be deemed to be a
distribution of rights, options or warrants to such holders
entitling them to subscribe for or purchase Common Stock at
the price per share for which Common Stock is issuable upon
conversion, exchange or exercise of such Convertible
Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such
rights, options or warrants, plus the minimum aggregate amount
of additional consideration, if any, other than such
Convertible Securities, payable upon the conversion, exchange
or exercise thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the conversion, exchange or
exercise of such Convertible Securities issuable upon the
exercise of such rights, options or warrants), and (ii) the
total maximum number of shares of Common Stock issuable upon
conversion, exchange or exercise of such Convertible
Securities shall be deemed to be the number of shares of
Common Stock offered for subscription or purchase. In case
such subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of
such consideration shall be as determined in good faith by the
Board of Directors of the Company. Shares of Common Stock
owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights,
warrants or options are not so issued, the Purchase Price
shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed. Upon
the expiration of such rights, options or warrants, or to the
extent any Convertible Securities issued upon the exercise of
such rights, options or warrants are redeemed by the Company,
or otherwise cease to be convertible into, to be exchangeable
for or to carry any such right to purchase, shares of Common
Stock, the adjustment to the Purchase Price which was made
upon the issuance of such rights, options or warrants and any
subsequent adjustments based thereon, shall be recomputed to
reflect the issuance of only the number of rights, options or
warrants to subscribe for or purchase only the number of
shares of Common Stock as to which such rights, options or
warrants were actually exercised and the number of such shares
which were actually issued upon conversion, exchange or
exercise of such Convertible Securities.
9
<PAGE> 77
(3) In case the Company shall fix a record date for
the making of a distribution to all holders of Common Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
or surviving corporation other than a consolidation or merger
in respect of which an adjustment is made pursuant to Section
10 hereof) of evidences of indebtedness or assets (other than
cash dividends payable out of consolidated earnings for the
Company's then current or immediately preceding fiscal year,
dividends payable in Common Stock and distributions which
result in an adjustment under Section 8(a) hereof) or rights,
options or warrants (excluding rights, options or warrants the
issuance of which results in an adjustment under Section 8(a)
or 8(b) hereof), the Purchase Price in effect after such
record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such date by a fraction,
the numerator of which shall be the then current market price
per share (as defined in Section 8(d) hereof) of Common Stock
on such date, less the fair market value (as determined in
good faith by the Board of Directors of the Company) of the
portion of assets, evidences of indebtedness or such rights,
options or warrants so to be distributed or paid applicable to
one share of Common Stock (or applicable to one share of
Common Stock) and the denominator of which shall be such
current market price per share of Common Stock. Such
adjustments shall be made successively whenever such a record
date is fixed or such an event occurs; and in the event that a
distribution of the kind described above is not so made, the
Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if the record date for
such distribution had not been fixed. Upon the expiration of
such rights, options or warrants, the adjustment to the
Purchase Price which was made upon the issuance of such
rights, options or warrants and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of
only the number of rights, options or warrants which were
actually exercised.
(4) For the purpose of any computation required in
accordance with this Section 8, the "current market price per
share" of any security, including the Common Stock (a
"Security" for the purpose of this Section 8(d)), on any date
shall be deemed to be the average of the daily closing prices
(as such term is hereinafter defined) per share of such
Security for the 20 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current market price per
share of the Security is determined during a period following
the announcement by the issuer of such Security of (i) a
dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or
(ii) any subdivision, combination or reclassification of such
Security and prior to the expiration of 30 consecutive Trading
Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case,
the current market price per share
10
<PAGE> 78
shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The "closing
price" for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security
is not listed or admitted to trading on any national
securities exchange, as reported by the NASDAQ Stock Market's
National Market, or if not so listed, the average of the high
bid and low asked prices in the over-the-counter market, as
reported in the Wall Street Journal, or, if on any such date
the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security
selected by the Board of Directors of the Company. If the
Security is not publicly held or so listed or traded, "current
market price per share" shall mean the fair value of the
Security as determined in good faith by the Board of Directors
of the Company, whose determination shall be conclusive. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed
or admitted to trading is open for the transaction of business
or, if the Security is not listed or admitted to trading on
any national securities exchange, a Business Day. The term
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of
New York are authorized or obligated by law or executive order
to close.
(5) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this Section 8(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(6) In the event that at any time, as a result of an
adjustment made pursuant to Section 8(a) hereof, the holder of
any Warrant thereafter exercised shall become entitled to
receive any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities
so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in Section
8(a) through (c) hereof, inclusive, and the provisions of
Sections 1, 6, 7, 10 and 15 hereof with respect to the shares
of Common Stock shall apply on like terms to any such other
securities.
11
<PAGE> 79
(7) Unless the Company shall have exercised its
election as provided in Section 8(i) hereof, upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 8(b) or (c) hereof, each Warrant
outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest hundredth) obtained by (i)
multiplying (x) the number of shares covered by a Warrant
immediately prior to this adjustment of the number of shares
by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product
so obtained by the Purchase Price in effect immediately after
such adjustment of the Purchase Price.
(8) Upon each adjustment of the number of shares of
Common Stock for which the Warrants are exercisable as
provided in Section 8(a) hereof, the Purchase Price payable
upon exercise of a Warrant shall be adjusted by multiplying
such Purchase Price immediately prior to such adjustment by a
fraction (i) the numerator of which shall be the number of
shares of Common Stock for which a Warrant was exercisable
prior to such adjustment and (ii) the denominator of which
shall be the number of shares of Common Stock for which a
Warrant is exercisable immediately thereafter.
(9) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of
Warrants, in substitution for any adjustment in the number of
shares of Common Stock purchasable upon the exercise of a
Warrant. Each Warrant outstanding after such adjustment of the
number of Warrants shall be exercisable for the same number of
shares of Common Stock for which such Warrant was exercisable
prior to such adjustment. Each Warrant held of record prior to
such adjustment of the number of Warrants shall become that
number of Warrants (calculated to the nearest hundredth)
obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase
Price in effect after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Warrants, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter,
but shall be at least ten days later than the date of the
public announcement. Upon each adjustment of the number of
Warrants pursuant to this Section 8(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of
record of Warrant Certificates on such record date Warrant
Certificates evidencing, subject to Section 11, the additional
Warrants to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Warrant Certificates held
by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the
12
<PAGE> 80
Company, new Warrant Certificates evidencing all the Warrants
to which such holders shall be entitled after such adjustment.
Warrant Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record
of Warrant Certificates on the record date specified in the
public announcement.
(10) Irrespective of any adjustment or change in the
Purchase Price or the number of shares of Common Stock
issuable upon the exercise of the Warrants, the Warrant
Certificates may continue to express the Purchase Price per
share and the number of shares which were expressed upon the
initial Warrant Certificates issued hereunder.
(11) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par
value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully
paid and nonassessable shares of such Common Stock at such
adjusted Purchase Price.
(12) Anything in this Section 8 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments required by this Section 8, as it in its sole
discretion shall determine to be advisable in order that any
consolidation or subdivision of the Common Stock, issuance
wholly for cash of any Common Stock at less than the current
market price, issuance wholly for cash of Common Stock or
securities which by their terms are convertible into or
exchangeable for Common Stock, dividends on Common Stock
payable in Common Stock or issuance of rights, options or
warrants referred to in this Section 8, hereafter made by the
Company to its common stockholders, shall not be taxable to
them.
SECTION IX. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 8 hereof (other
than situations in which no adjustment is required pursuant to Section 8(e)),
the Company shall (a) promptly obtain a certificate of a firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Company (who may be the regular auditors of the Company) setting forth the
Purchase Price as so adjusted, the number of shares of Common Stock issuable
upon the exercise of each Warrant as so adjusted and a brief statement of the
facts accounting for such adjustment, and (b) mail a brief summary thereof to
each holder of a Warrant Certificate in accordance with Section 16 hereof. The
Company will keep copies of such certificate at its office maintained pursuant
to Section 2(b) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant.
SECTION X. Consolidation, Merger or Sale of Assets. If the
Company shall at any time consolidate with or merge with and into another
corporation or shall sell or transfer
13
<PAGE> 81
to another entity all or substantially all of the property of the Company, the
holder of any Warrant will thereafter have the right to receive, upon the
exercise thereof in accordance with and subject to the terms of this Warrant,
the securities, cash and other property to which the holder of the number of
shares of Common Stock purchasable (at the time of such consolidation, merger,
sale or transfer) upon the exercise of such Warrant would have been entitled
upon such consolidation, merger, sale or transfer, if any. The Company shall
take such steps in connection with such consolidation, merger, sale or transfer,
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to any securities or
property (including cash) thereafter deliverable upon the exercise of the
Warrants. The Company, the successor corporation or the purchasing entity, as
the case may be, shall execute and deliver to the Company an agreement so
providing. The provisions of this Section 10 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
SECTION XI. Fractional Warrants and Fractional Shares.
(1) The Company shall not be required to issue fractions of
Warrants or to distribute Warrant Certificates which evidence fractional
Warrants. Subject to Section 11(c) hereof, in lieu of such fractional Warrants,
there shall be paid to each registered holder of a Warrant Certificate with
regard to which a fractional Warrant would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole Warrant.
For the purposes of this Section 11(a), the current market value of a whole
Warrant shall be the closing price of the Warrant (as determined pursuant to the
second sentence of Section 8(d) hereof) for the Trading Day immediately prior to
the date on which such fractional Warrant would have been otherwise issuable. If
on any such Trading Date the Warrants were not publicly held or listed or traded
in a manner described under the second sentence of Section 8(d) hereof, the
current market value of a whole Warrant shall be the fair value of the Warrants
on such Trading Date as determined in good faith by the Board of Directors of
the Company, whose determination shall be conclusive.
(2) The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Warrants or to distribute
certificates which evidence fractional shares. Subject to Section 11(c) hereof,
in lieu of such fractional shares of Common Stock, there shall be paid to each
registered holder of a Warrant Certificate with regard to which a fractional
share would otherwise be issuable at the time such Warrant Certificate is
exercised as herein provided, an amount in cash equal to the same fraction of
the current market value of a share of Common Stock. For purposes of this
Section 11(b), the current market value of a share of Common Stock shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 8(d)) for the Trading Day immediately prior to the date of
such exercise. If on such Trading Date the Common Stock was not publicly held or
listed or traded in a manner described under the second sentence of Section 8(d)
hereof, the current market value of a share of Common Stock shall be the fair
value of a share of Common Stock as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive.
14
<PAGE> 82
(3) If the Company is unable to pay any amounts of cash to
registered holders of Warrant Certificates in respect of fractional Warrants or
fractional shares of Common Stock in accordance with Section 11(a) or (b)
hereof, as the case may be, by reason of the provisions of the Company's then
outstanding debt obligations or otherwise, the Company shall deliver to such
holders an additional whole Warrant or share of Common Stock, as the case may
be, in lieu of such fractional Warrants or shares.
(4) The holder of a Warrant, by the acceptance of the Warrant,
expressly waives his right to receive any fractional Warrant or any fractional
share upon exercise of a Warrant.
SECTION XII. Right of Action; No Entitlement to Vote or
Receive Dividends.
(1) Any registered holder of this Warrant Certificate, without
the consent of the holder of any other Warrant Certificate, may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Warrants evidenced by this Warrant
Certificate in the manner provided herein.
(2) Prior to the exercise of the Warrants evidenced hereby and
the date of the certificate representing the shares of Common Stock issuable
upon exercise of such Warrants pursuant to Section 7 hereof, the holder of this
Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to, or be deemed for any purpose the
holder of, shares for which the Warrants shall be exercisable, including,
without limitation, the right to vote or to receive dividends, or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION XIII. Agreement of Warrant Certificate Holders. Every
holder of this Warrant Certificate, by accepting the same, consents and agrees
with the Company and with every other holder of a Warrant Certificate that (a)
the Warrant Certificates are transferable only on the registry books of the
Company if surrendered at the principal office of the Company maintained
pursuant to Section 2(b) hereof, duly endorsed or accompanied by a proper
instrument of transfer and (b) the Company may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates) for all purposes whatsoever,
and the Company shall not be affected by any notice to the contrary.
SECTION XIV. Issuance of New Warrant Certificates.
Notwithstanding any of the provisions of this Warrant to the contrary, the
Company may, at its option, issue new Warrant Certificates evidencing Warrants
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price per share and the number or kind or
class of shares of stock or other securities or property purchasable under
15
<PAGE> 83
this Warrant Certificate made in accordance with the provisions of this Warrant
Certificate; provided, that such new Warrant Certificate shall not have terms
inconsistent with the terms of this Warrant Certificate.
SECTION XV. Notice of Proposed Actions. In case the Company
shall propose (a) to pay any stock dividend to the holders of its Common Stock
or to make any other distribution to the holders of its Common Stock (other than
cash dividends paid out of consolidated earnings for the Company's then current
or immediately preceding fiscal year), or (b) to offer to the holders of its
Common Stock rights, warrants or options to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Common Stock (other than a reclassification involving only the subdivision or
combination of outstanding shares of Common Stock), or (d) to effect any
consolidation, merger or sale, transfer or other disposition of all or
substantially all of the property, assets or business of the Company, or (e) to
effect the liquidation, dissolution or winding-up of the Company, then, in each
such case, the Company shall give to the holder of this Warrant, in accordance
with Section 16 hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, or distribution of
rights, warrants or options, or the date on which such reclassification,
consolidation, merger, sale, transfer, disposition, liquidation, dissolution, or
winding-up is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed, and such notice shall be so
given in the manner provided in Section 16 at least 20 days prior to (i) the
record date for the purposes of any action covered by clause (a) or (b) above or
(ii) the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be earlier.
SECTION XVI. Notices. Notices or demands authorized by this
Agreement to be given or made by the holder of this Warrant Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until the holder hereof is notified, in accordance
with this Section 16, in writing by the Company of another address) as follows:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Secretary
Notices and demands authorized by this Agreement to be given or made by the
Company to the holder of this Warrant Certificate shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.
16
<PAGE> 84
SECTION XVII. Supplements and Amendments. Except as provided
in Section 14 hereof, the Company may not amend this Warrant Certificate without
the consent of the holder hereof.
SECTION XVIII. Governing Law. This Warrant Certificate shall
be governed by and construed in accordance with the laws of the State of New
York without reference to the principles of conflicts of laws.
17
<PAGE> 85
SECTION XIX. Descriptive Headings. Descriptive headings of the
several Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
GT INTERACTIVE SOFTWARE CORP.
By:___________________________
Name:
Title:
Attest:
____________________
Secretary
18
<PAGE> 86
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto ________________________
_________________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Date: _____________, 19__
_________________________
Signature
(Note: The above signature must
correspond with the name as written upon
the face of this Warrant Certificate in
all respects, without any alteration or
change whatsoever.)
19
<PAGE> 87
Form of Reverse Side of Warrant Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the
Warrants evidenced by the Warrant Certificate.)
To: GT INTERACTIVE SOFTWARE CORP.
The undersigned hereby irrevocably elects to exercise
___________________ Warrants represented by this Warrant Certificate to purchase
the shares of Common Stock of GT Interactive Software Corp. issuable upon the
exercise of such Warrants and herewith [tenders payment for such shares in the
amount of $_______] [hereby instructs you, in payment of the Purchase Price, to
deduct ___ shares of Common Stock from the number of shares issuable upon
exercise of the Warrants exercised hereby, and to deliver ___ shares of Common
Stock (the net number of shares of Common Stock)] to the undersigned, in
accordance with the terms of this Warrant Certificate. The undersigned requests
that certificates for such shares of Common Stock be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________
(Please print name and address)
_______________________________________________________________ and that such
certificates be delivered to ______________ whose address is
_____________________.
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________
(Please print name and address)
_______________________________________________________________
20
<PAGE> 88
Any cash payments to be made in lieu of fractional shares should be made to
____________ whose address is _____________________ and the check representing
payment therefor should be delivered to _____________ whose address is
___________________________.
Date: _____________, 19__
_________________________
Signature
(Note: The above signature must
correspond with the name as written upon
the face of this Warrant Certificate in
all respects, without any alteration or
change whatsoever.)
21
<PAGE> 89
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
, 199_, by and between GT Interactive Software Corp., a Delaware
corporation (the "Company"), and WMS Industries Inc., a Delaware corporation
(the "Holder"). Capitalized terms used herein without definition shall have
the meanings ascribed thereto in the Warrant (as defined below).
WHEREAS, the parties hereto have entered into that certain
GTIS Master Option and License Agreement, dated December 28, 1994, and that
certain GTIS Master Option and License Agreement (Home Video Games), dated March
31, 1995, pursuant to which, among other things, the Company has agreed to issue
to the Holder warrants to purchase an aggregate of shares of Common
Stock [$3,000,000/IPO Price] of the Company (the "Warrants"); and
WHEREAS, the Company desires to provide the Holder with some
liquidity for the Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Common Stock" means the common stock of the Company,
no par value.
"Initial Public Offering" means the Company's initial
Public Offering.
"Public Offering" means the closing of the sale of
Common Stock pursuant to an effective Registration Statement.
"Registration Statement" means a registration
statement filed pursuant to the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shares" means, with respect to the Holder, all
shares of Common Stock issued or issuable upon exercise of the Warrants.
<PAGE> 90
2. Registration Rights.
2.1 Demand Registration.
2.1.1 General. Subject to the GTIS Call
described below, and only so long as Form S-3 (or any equivalent form
then in effect) is available for registration of the Demand Shares
referred to below, at any time after 2 years following the Company's
Initial Public Offering, the Holder may make a written request (the
"Demand Request"), to the Company to register, under the Securities Act
and under the securities or "blue sky" laws of any jurisdiction
designated by the Holder (the "Demand Registration"), the number of
Shares (the "Demand Shares") stated in such request, provided, that the
Holder shall not have sold pursuant to one or more registrations
pursuant to Section 2.2 below or otherwise an aggregate of more than
two-thirds of the Shares, prior to the Demand Request; provided,
however, that the Company shall not be obligated to effect more than
one registration pursuant to this Section 2.1. The request for a Demand
Registration by the Holder shall specify the amount of Demand Shares
proposed to be sold and the intended method of disposition thereof.
2.1.2 Company Repurchase Option. (a)
Anything to the contrary in this Section 2 notwithstanding, upon the
receipt by the Company of the Demand Request, the Company shall have
the right and option, in its sole discretion, (the "GTIS Call") to
require the Holder to sell to the Company all, but not less than all of
the Warrants exercisable for the Demand Shares. The Company shall have
thirty (30) days from the date it receives the Demand Request to notify
the Holder, in writing, of its exercise of the GTIS Call and the number
of Warrants to be purchased by the Company (the "Call Exercise
Notice").
(b) If the Company shall exercise
the GTIS Call, the Company shall purchase and the Holder shall sell the
Warrants specified in the Call Exercise Notice at a purchase price
equal to the product of (x) the difference between the Exercise Price
(as defined in the Warrants) and the current market price per share (as
defined in the Warrants) on the date of the Call Exercise Notice and
(y) the number of shares for which the Warrants being purchased
pursuant to the GTIS Call are exercisable.
(c) The closing of the GTIS Call
exercised by the Company pursuant to this Section 2.1.2 shall be held
at the principal office of the Company at 11:00 a.m., local time on the
45th day after the giving of the Call Exercise Notice or at such other
time and place as the parties to the transaction may agree. At such
closing, the Holder shall deliver the Warrants, duly endorsed for
transfer and accompanied by all requisite transfer taxes, if any, and
such Warrants shall be free and clear of any and all liens, claims,
options, charges, encumbrances and security interests of any nature and
the Holder shall so represent and warrant to the Company. In
2
<PAGE> 91
addition, the Holder shall further represent and warrant that it is the
beneficial and record owner of such Warrants. At the closing, the
Company shall deliver payment in full in immediately available funds
for the Warrants being purchased, unless the parties otherwise agree.
At such closing, all of the parties to the transaction shall execute
such additional documents as are otherwise necessary or appropriate to
effect the transfer of the Warrants.
2.1.3 Effective Demand Registration. The
Company shall use its reasonable efforts to file as promptly as
practicable and cause the Demand Registration pursuant to Section 2.1.1
to become effective not later than 120 days after the Company receives
the Demand Request from the Holder; provided that such Demand Request
shall not have been withdrawn by the Holder pursuant to the terms
hereof. A registration shall constitute a Demand Registration (a) if it
has become effective and remains effective for the lesser of (i) 120
days and (ii) the completion of the sale, pursuant to such registration
statement, of all of the Shares covered thereby and (b) irrespective of
the number of Demand Shares included in such registration.
2.1.4 Underwriting Adjustment. If the Demand
Registration pursuant to Section 2.1.1 involves an underwritten
offering, and the managing underwriter shall advise the Company in
writing that, in its opinion, the number of shares of Common Stock
requested to be included in such registration exceeds the number which
can be sold in such offering without adversely affecting the price per
share which may be obtained by the holders of the Demand Shares, the
Company will include in such registration, to the extent of the number
of shares of Common Stock which the Company is so advised can be sold
in such offering, (a) first, the Demand Shares and (b) second, all
other shares of Common Stock proposed to be included in such
registration, on a pro rata basis.
2.2 Incidental or "Piggyback" Registration.
2.2.1 General. If the Company proposes to
register any shares of Common Stock under the Securities Act (other
than pursuant to a Registration Statement on Form S-4, S-8 or any
equivalent form then in effect) for public sale for its own account or
for the account of any stockholder, at any time after the Initial
Public Offering and on or prior to the seventh anniversary of the
Initial Public Offering, the Company shall give to the Holder notice of
such proposed registration at least fifteen (15) days prior to the
filing of a Registration Statement with respect to such public sale.
Upon the written request of the Holder (the "Incidental Request")
delivered to the Company within ten (10) days after the receipt of the
notice from the Company (which request shall state the number of Shares
(the "Incidental Shares") that such Holder wishes to sell or distribute
publicly under such Registration Statement proposed to be filed by the
Company), the Company shall use its reasonable efforts to include such
Shares in such registration, and to cause such registration to become
and remain effective to the extent and for so long as the Company keeps
such registration effective as to such other
3
<PAGE> 92
shares of Common Stock (the "Incidental Registration"); provided that
such Incidental Request shall not have been withdrawn by the Holder
pursuant to the terms hereof.. The Company may withdraw a Registration
Statement at any time before it becomes effective or postpone or
terminate the offering without obligation to the Holder.
2.2.2 Underwriting Adjustment. If the
Incidental Registration pursuant to Section 2.2.1 involves an
underwritten offering, and the managing underwriter shall advise the
Company in writing that, in its opinion, the number of shares of Common
Stock requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the
price per share which may be obtained by the holders of the Incidental
Shares, the Company will include in such registration, to the extent of
the number of shares of Common Stock which the Company is so advised
can be sold in such offering, (a) first, shares of Common Stock that
the Company proposes to issue and sell for its own account, if any, (b)
second, shares a stockholder proposes to include in such registration
pursuant to the exercise of demand registration rights, if any, and (c)
third, all other shares of Common Stock (including Incidental Shares)
proposed to be included in such registration, on a pro rata basis.
2.3 Registration Procedures. With respect to any
Registration Statement that includes any Shares pursuant to Sections 2.1 and
2.2:
2.3.1 Underwriters.
(a) In the event of a Demand
Registration pursuant to Section 2.1, the Holder may select and obtain
an investment banking firm (which shall be of national reputation) to
act as the managing underwriter of the offering; provided, that, such
underwriter shall be acceptable to the Company.
(b) In the event of an Incidental
Registration pursuant to Section 2.2, the distribution for the account
of the Holder shall be underwritten by the same underwriters, if any,
who underwrite the distribution of the securities for the account of
the Company and/or any other persons whose securities are covered by
such Registration Statement.
2.3.2 Legal Opinions. In connection with a
Demand Registration or an Incidental Registration, the Holder shall
retain counsel and shall cause such counsel to deliver (a) to the
managing underwriter such opinions as the managing underwriter may
reasonably require and (b) to the Company and the Securities and
Exchange Commission, such opinions as they shall require.
2.3.3 Execution of Documents. In connection
with a Demand Registration or an Incidental Registration, the Holder
shall (a) upon request of the Company, execute power of attorney,
deposit and custodian agreements in form and
4
<PAGE> 93
substance satisfactory to the managing underwriter and (b) execute an
underwriting agreement in form and substance satisfactory to the
managing underwriter, which underwriting agreement shall contain
certain indemnification provisions as provided in Section 2.4 or as
required by the managing underwriter.
2.3.4 Registration Statement. The Company
will deliver to the Holder, after the effectiveness of any Registration
Statement, such reasonable number of copies of a definitive prospectus
included in such Registration Statement and of any revised or
supplemental prospectus as the Holder may from time to time request.
2.3.5 Expenses. In connection with the
registration of Demand Shares and Incidental Shares pursuant to
Sections 2.1 and 2.2, the Company shall pay all reasonable expenses
(other than underwriting discounts and commissions) whether or not such
Demand Registration or Incidental Registration becomes effective;
provided, however, the Company shall not be obligated to pay such
expenses if the failure of the Demand Registration or the Incidental
Registration to become effective is a result of the action or request
by the Holder, unless the Holder agrees to forfeit the registration
right granted pursuant to Section 2.1; and provided, further, that the
Company shall not be obligated to pay any expenses relating to any
extraordinary accounting review or special audit. If the Company
believes any extraordinary accounting review or special audit will be
necessary in connection with such registration, it shall advise the
Holder, who may withdraw such Holder's Demand Request or Incidental
Request, as the case may be, within 5 days of the receipt of such
advice by the Company.
2.3.6 Hold-Back.
(a) In the event Shares are
included in a Registration Statement hereunder, the Holder agrees not
to effect any public sale or distribution of shares of Common Stock
during the seven days prior to, and during the ninety (90) day period
following, the effective date of such Registration Statement or such
longer period as shall be requested by the managing underwriter, but in
no event longer than 180 days (except as part of such registration), if
and to the extent requested by the Company or by the managing
underwriter or underwriters of such registration.
(b) The Company agrees not to
effect any public sale or distribution of any of its securities for its
own account (except pursuant to registrations on Form S-4 or S-8 or any
equivalent form then in effect) during the ninety (90) day period
beginning on the later of (i) the effective date of any Registration
Statement in which the Holder is participating and (ii) the
commencement of a public distribution of the shares of Common Stock
pursuant to such Registration Statement.
2.3.7 Registration Delay. Anything to the
contrary contained in this Agreement notwithstanding, if the Company
shall furnish to the Holder, in connection with a Demand Registration
or an Incidental Registration, written notification
5
<PAGE> 94
that in the Company's opinion, it would be detrimental to the Company
and its stockholders for a registration statement to be filed at that
time and it is, therefore, necessary to defer the filing of such
registration statement, the Company shall have the right to defer
taking action with respect to such filing for a period of not more than
90 days after receipt of the Demand Request or the Incidental Request,
as the case may be.
2.3.8 Limitation on Demand and Incidental
Registration Rights. Anything to the contrary contained in this
Agreement notwithstanding, when, in the opinion of counsel for the
Company (which counsel shall be experienced in securities law matters),
registration of the Shares is not required by the Securities Act and
other applicable securities laws, in connection with a proposed public
sale of such Shares, the Holder shall have no rights, pursuant to this
Section 2, to request a Demand Registration or an Incidental
Registration, as the case may be, in connection with such proposed
sale.
2.4 Indemnity. In the case of any registration of
Shares pursuant to this Section 2, the Company will indemnify and hold harmless
the Holder under Sections 2.1 and 2.2 hereof (the "Indemnitee"), and any person
who controls such Indemnitee or underwriter within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages, liabilities and
expenses (collectively, "Losses") resulting from any untrue statement or
allegedly untrue statement of a material fact contained in any Registration
Statement or preliminary or final prospectus contained therein, or any amendment
or supplement thereto, or from any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in light of the circumstances under which they were made)
not misleading, except insofar as the same may have been based on (a)
information furnished in writing to the Company by such Indemnitee or such
underwriter expressly for use therein and used in accordance with such writing
or (b) the failure of the underwriter to send or give a copy of the final
prospectus (or any amendment or supplement thereto) to the person asserting the
untrue statement or omission or alleged omission at or prior to the sale of the
Shares to such person if such statement was corrected in the final prospectus.
The Indemnitee, by acceptance of the provisions herein, agrees to furnish to the
Company such information concerning such Indemnitee and the proposed sale or
distribution as shall, in the opinion of counsel for the Company, be necessary
in connection with any such registration or qualification of any Demand Shares
or Incidental Shares, and to indemnify and hold harmless the Company, its
officers, directors, employees and agents and each of its underwriters (and any
person who controls the Company or such underwriters within the meaning of
Section 15 of the Securities Act) against all Losses resulting from any untrue
statement or allegedly untrue statement of a material fact contained in any
Registration Statement or preliminary or final prospectus contained therein, or
any amendment or supplement thereto, or from any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made) not misleading, insofar as the same may have been based on information
furnished in writing to the Company by such Indemnitee or to such underwriter
expressly for use therein and used in accordance with such writing, but not
insofar as the same may have been based on the failure of the underwriter to
6
<PAGE> 95
send or give a copy of the final prospectus (or any amendment or supplement
thereto) to the person asserting the untrue statement or omission or alleged
omission at or prior to the sale of the Shares to such person if such statement
was corrected in the final prospectus. In no event shall the liability of the
Indemnitee hereunder be greater than the dollar amount of the proceeds received
by such Indemnitee upon the sale of the Shares giving rise to the aforesaid
indemnification obligation.
3. Miscellaneous.
3.1 Notices. All notices or other communication
required or permitted hereunder shall be in writing and shall be
delivered personally, telecopied or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given
when so delivered personally, telecopied or sent be certified,
registered or express mail or, if mailed, five days after the date of
deposit in the United States mail, as follows:
(a) if to the Company:
GT Interactive Software Corp.
116 East 40th Street
New York, New York 10016
Attention: Harry Rubin
Telecopy: (212) 213-9319
with a copy to:
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, New York 10022-3903
Attention: David P. Levin, Esq.
Telecopy: (212) 715-8000
(b) if to WMS Industries Inc.:
3401 North California Avenue
Chicago, Illinois 60618
Attention: Neil D. Nicastro,
President
Telecopy: (312) 539-2099
with a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
7
<PAGE> 96
New York, New York 10036
Attention: Jeffrey Siegel, Esq.
Telecopy: (212) 730-1964
Any party may, by notice given in accordance with this Section 3.1, designate
another address or person for receipt of notices hereunder.
3.2 Amendment and Waiver.
(a) No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive
of any remedies that may be available to the parties hereto at law, in
equity or otherwise.
(b) Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of
any provision of this Agreement, and any consent to any departure by
any party from the terms of any provision of this Agreement, shall be
effective only if it is made or given in writing and signed by the
party against whom enforcement thereof is sought.
3.3 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
3.4 Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
3.5 Entire Agreement. This Agreement is intended by
the parties as a final expression of this agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
3.6 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the context may require.
8
<PAGE> 97
3.7 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state, without regard
to the principles of conflicts of law thereof.
3.8 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement and the rights and
obligations hereunder are not assignable by the Holder without the prior written
consent of the Company.
3.9 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first written above.
GT INTERACTIVE SOFTWARE CORP.
By:_____________________________
Name:
Title:
WMS INDUSTRIES INC.
By:_____________________________
Name:
Title:
9
<PAGE> 1
EXHIBIT 10.13
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
AMENDMENT TO
GTIS MASTER OPTION AND LICENSE AGREEMENT
(HOME VIDEO GAMES)
This amendment agreement (the "First Amendment") is made and entered
into the 27th day of March, 1996, by and among WMS INDUSTRIES INC. ("WMS"),
WILLIAMS ELECTRONICS GAMES, INC. ("WEG"), MIDWAY MANUFACTURING COMPANY
("Midway") and WILLIAMS ENTERTAINMENT INC. ("WEI"), each being Delaware
corporations with offices at 3401 North California Avenue, Chicago, Illinois
60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware corporation with
offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, on March 31, 1995 WMS, WEG, Midway, WEI and GTIS entered into
the GTIS Master Option and License Agreement (Home Video Games) (the "GTIS
Master Home Video Agreement") pursuant to which the WMS Group granted to GTIS
certain rights with respect to the manufacture, distribution and sale of
versions of Games for use on Designated Consumer Game Platforms; and
WHEREAS, WMS, WEG, Midway, WEI and GTIS desire to amend the GTIS
Master Home Video Agreement as provided for in this First Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
<PAGE> 2
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Capitalized terms used, but not defined or revised herein,
shall have the meaning ascribed to such terms in the GTIS Master Home Video
Agreement or the form of Home Video Game Distribution and License Agreement
annexed as Exhibit A to the GTIS Master Home Video Agreement.
2. This First Amendment shall become effective on the date WII
closes the acquisition of AGC pursuant to the Stock Purchase Agreement. WMS
will give GTIS prompt written notice of such closing. If such acquisition does
not close by June 30, 1996, this First Amendment shall be null and void and of
no force and effect. The capitalized terms used in this paragraph are defined
in paragraph 3 of this First Amendment. GTIS' rights, if any, under the GTIS
Master Home Video Agreement and form of Home Video Game Distribution and
License Agreement with respect to any games acquired pursuant to the Stock
Purchase Agreement, and any subsequent sequels, adaptations or other versions
thereof, shall be subject to all third party rights pursuant to agreements made
by the Atari Group existing at the Effective Date. All such rights, to the
extent known by WMS, are set forth on a schedule to a letter dated the date
hereof and signed by WMS and GTIS.
3. Section 1 of the GTIS Master Home Video Game Agreement shall
be amended to add or replace definitions as follows:
1.1(a) "AGC" shall mean Atari Games Corporation, a California
corporation, which is currently a wholly-owned subsidiary of Warner
Communications Inc., and which is to be sold to WII pursuant to the
Stock Purchase Agreement.
2
<PAGE> 3
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
1.1(b) "Atari Advance" shall mean the aggregate * Dollars
advance by GTIS to WMS pursuant to the Atari Agreements.
1.1(c) "Atari Agreements" shall mean the Master Option and
License Agreement for Atari PC Games and the Master Option and License
Agreement for Atari Home Video Games entered into by WMS and GTIS
dated March 27, 1996."
1.1(d) "Atari Game" shall mean (i) any game developed or
acquired by or on behalf of AGC or entities which were affiliates of
AGC prior to AGC being acquired by WII pursuant to the listed on
Schedule 1 to this First Amendment, and any adaptations of such games
for other platforms, and (ii) any game currently in development or
developed subsequent to such acquisition by or on behalf of AGC or a
member of the Atari Group, or developed, in whole or in substantial
part, by any person or persons who were employees of AGC or a member
of the Atari Group as of the closing date of such acquisition and who
are employees of any member of the WMS Group at the time of such
development, and any adaptations of such games for other platforms.
For purposes of this Section, employees shall be deemed to include
independent contractors who work a substantial portion of their time
at the
3
<PAGE> 4
facilities of any member of the WMS Group.
1.1(e) "Atari Group" shall mean AGC, or any entity, a
majority of whose capital stock is owned, directly or indirectly, by
AGC or with respect to which during the term of this Agreement, AGC,
directly or indirectly, has the legal power, without the consent of
any third party, to direct the acquisition of rights to or
exploitation of Games on Designated Consumer Game Platforms.
1.1(f) "Business Day" shall mean any day other than a
Saturday, Sunday or Federal holiday.
1.4(a) "Early Termination Event" shall mean AGC ceasing to
be at least 50.1% owned by a member of the WMS Group, or the Atari
Group transferring a majority of its intellectual property assets and
licenses to a person or entity who is not a member of the WMS Group.
1.7 "Game" shall mean any home video game designed for
play on a specific Designated Consumer Game Platform which has been
released for commercial shipment in the normal course of business by
any member of the WMS Group or by any licensee of the WMS Group on
such Designated Consumer Game Platform for sale in commercial
quantities in the United States in the normal course of business, but
excluding (i) any such home video game with respect to which the WMS
Group shall, prior to the date
4
<PAGE> 5
hereof, have granted rights (or any option, right of first refusal or
negotiation or other ability to obtain rights which may be
subsequently exercised) to any third party, including without
limitation any sublicensee of the WMS Group, to manufacture,
distribute or sell such home video game on such specific Designated
Consumer Game Platform within the Licensed Territory, including any
renewals or extensions thereof resulting from the exercise of
previously granted rights; and (ii) any Atari Game. Set forth on
Schedule 1 annexed hereto is a list of all material agreements
pursuant to which the WMS Group, other than the Atari Group, has,
prior to March 31, 1995, granted rights to manufacture, distribute and
sell such home video games on Designated Consumer Game Platforms
within the Licensed Territory, but excluding any agreements pursuant
to which the WMS Group has granted rights to home video games based on
games which have been released for commercial shipment prior to March
31, 1995 in the normal course of business by the WMS Group or by any
sublicensee of the WMS Group as coin-operated video or pinball games
or on any dedicated home video game platform or agreements pursuant to
which the WMS Group has granted rights to any derivative or sequel to
any such released coin-operated video, pinball or home video game. A
home video
5
<PAGE> 6
game shall be deemed a separate Game with reference to the specific
Designated Consumer Game Platform on which it has been designed for
play.
1.11 "Initial Option Period" shall mean the period
commencing on the date hereof and ending on June 30, 2001; provided,
however, if the Atari Advance has not been fully recouped by June 30,
2001, the Initial Option Period shall be extended to a date which is
the earlier to occur of (i) June 30, 2003, or (ii) the date on which
the Atari Advance is fully recouped. In determining whether the Atari
Advance has been fully recouped for all purposes under this Agreement,
amounts owed by GTIS but not yet reported, paid or credited to the
Licensor shall be deemed recouped by GTIS. The Initial Option Period
may be further extended under the following circumstances. If (a) an
Early Termination Event occurs prior to June 30, 2000, and (b) GTIS
shall not have fully recouped the Atari Advance by the end of the
Initial Option Period as extended pursuant to the first sentence of
this Section 1.11 (as such date may be further extended from time to
time by future amendments or extensions other than the extensions next
referred to in this sentence), then the Initial Option Period shall be
further extended to a date which is the earlier to occur of (x) the
date on which the Atari Advance is
6
<PAGE> 7
fully recouped or (y) the date, to the nearest calendar quarter end,
determined by adding to the date the Initial Option Period as extended
would have expired, the number of days between the occurrence of the
Early Termination Event and June 30, 2001.
1.23(a) "Pirate" shall mean an individual or entity which
counterfeits a game or sells counterfeit games.
1.27(a) "Stock Purchase Agreement" shall mean the Stock
Purchase Agreement dated February 23, 1996 between Warner
Communications Inc. and WII pursuant to which Warner Communications
Inc. has agreed to sell and WII has agreed to purchase all of the
outstanding stock of AGC.
1.27(b) "WII" shall mean Williams Interactive Inc., a
wholly -owned subsidiary of WMS.
4. The GTIS Master Home Video Agreement shall be amended to add
a new Section 2.8 which shall read as follows:
Royalties payable to WMS pursuant to Schedule B of the Home
Video Game Distribution and License Agreement are measured by the
wholesale price of Licensed Product. Accordingly, reasonably in
advance of WMS' decision to enter into a developer contract and
reasonably in advance of GTIS' initial release of the Licensed
Product, GTIS shall advise WMS, at WMS' request, of GTIS' expected
pricing strategy and the
7
<PAGE> 8
reasons therefor. Nothing herein shall be deemed to restrict GTIS'
freedom in selecting wholesale sales prices it considers appropriate,
which shall be in GTIS' sole discretion.
5. The GTIS Master Home Video Agreement shall be amended
to add a new Section 2.9 which shall read as follows:
If, under Section 2.1 of any Home Video Game Distribution
and License Agreement entered into under this Agreement, Licensor
has granted written approval (which shall not be unreasonably
withheld) to Licensee of a specific sublicensee for the Licensed
Property, such approval shall apply to the sublicensing by that
sublicensee of all Licensed Properties licensed to Licensee under Home
Video Game Distribution and License Agreements entered into under this
Agreement, subject to the following: (i) the sublicense agreements
shall contain provisions with respect to quality of Licensed Product,
trademarks, copyrights, materials, other intellectual property rights,
rights of additional sublicensing or assignment, termination rights,
confidentiality, accounting, auditing, reporting and payment
procedures in form agreed to by GTIS and WMS, and the form as so
agreed to may be used by all approved sublicensees described in clause
(iii) below; provided that if such form is not so used, any other form
to be used shall be subject to prior approval as
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
provided in this subsection (i); (ii) no such blanket approval shall
be deemed given with respect to Licensed Properties as to which
approval requirements imposed by third parties, such as the NFL and
NBA, apply; (iii) if the sublicense is for a Marketing Area other than
those designated as Key Marketing Areas in such Home Video Game
Distribution and License Agreement and if the expected sales volume in
such Marketing Area, in GTIS' good faith judgment, is an average of *
units or less per SKU per year, Licensee will not be required to
obtain Licensor's prior written approval of the terms of such license
but Licensee will be required to provide a copy of each sublicense to
Licensor within ten (10) Business Days after GTIS enters into such
sublicense; and (iv) if the Marketing Area is designated as a Key
Marketing Area or if, in GTIS' good faith judgment, the expected sales
volume for such Marketing Area is more than an average of * units per
SKU per year, Licensee will be required to obtain Licensor's prior
written approval, which Licensor will not unreasonably withhold, of
the terms of a sublicense for such Marketing Area even if the identity
of the sublicensee has been previously approved; provided, however, if
a sublicense is for multiple platforms and multiple games, the
approval of the sublicense will be deemed to be
9
<PAGE> 10
approval for all Games distributed under that sublicense (subject to
clause (ii)). Anything to the contrary notwithstanding, (x) if a
previously approved sublicensee becomes an Exporter or a Pirate,
Licensee will immediately upon becoming aware thereof notify Licensor
of the identity of such Exporter or Pirate and as soon as practicable
terminate the sublicense upon request by Licensor, and (y) Licensor
and Licensee will review every two years the identity of sublicensees,
and those sublicensees who previously received blanket approval as
provided in the first sentence of this Section and who are no longer
considered acceptable by Licensor, in the exercise of Licensor's
reasonable judgment, will no longer have such blanket approval and
will be subject to Licensor's prior approval with respect to all
future sublicenses, in accordance with the approval procedures
set forth above. Licensee shall use all reasonable efforts to cause
each agreement with its sublicensees to permit Licensee to terminate
such agreement immediately if such sublicensee shall be or become an
Exporter or a Pirate.
6. Section 7 of the GTIS Master Home Video Agreement and
Section 16 of the form of Home Video Game Distribution Agreement annexed as
Exhibit A thereto shall be amended to add at the end thereof, the following:
With respect to this Agreement and the Home Video Game
Distribution and License Agreements entered into in connection
10
<PAGE> 11
herewith, each of WMS Group and GTIS agree to use reasonable efforts
to ensure that either of them may disclose the proprietary information
of the other (including, without limitation, the software source code
and tools relating to any Game), only to those persons within their
organizations who have a need to know such information in order to
perform its obligations under this Agreement and the Home Video Game
Distribution and License Agreements and any such disclosure shall be
limited to the information which needs to be known. Further, neither
the WMS Group nor GTIS shall use any such proprietary information for
purposes other than the performance of its obligations under this
Agreement and the Home Video Game Distribution and License Agreements.
7. Paragraph 12.1 of the GTIS Master Home Video Agreement shall
be amended to delete the parenthetical language "(including its sublicenses and
affiliates as one party)" in the last sentence of such Section and by replacing
the words "as long as that party remains fully liable for its obligations
hereunder" at the end of the second sentence of such Section 12.1 with the
words "as long as both the assignee and the assignor remain fully liable for
assignor's obligations hereunder."
8. Section 1 of the form of Home Video Game Distribution and
License Agreement, annexed as Exhibit A to the GTIS Master Home Video
Agreement, shall be amended by adding at the end thereof the following:
11
<PAGE> 12
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Capitalized terms used, but not defined herein, shall have the
meaning ascribed to such terms in the GTIS Master Agreement.
9. Schedule B to the Home Video Game Distribution and License
Agreement shall be amended as follows:
9.1. The paragraph under the heading "Recoupment"
shall be amended to replace the words "earned and otherwise payable" on the
first and second lines of such paragraph by the words "applied or accrued" and
to replace the words "actually paid" in line seven of such paragraph by the
words "applied or accrued."
9.2. A new paragraph shall be added at the end of
the last paragraph under the heading "Recoupment" on Schedule B to the Home
Video Game Distribution and License Agreement which shall read as follows:
"If the Atari Advance has not been fully recouped by GTIS on
the date on which the total of recoupable amounts under this
Agreement and Other Home Video Game Distribution and License
Agreements equals the * Dollars Minimum Guaranteed Royalty and
Guaranteed Advance Royalty paid by the Licensee under the GTIS Master
Agreement, then royalties otherwise payable under this Agreement shall
be recoupable against the Atari Advance in the manner set forth in
this Schedule B until the Atari Advance shall be fully recouped. In
determining whether the Atari Advance
12
<PAGE> 13
has been fully recouped, amounts owed by GTIS but not yet reported,
paid or credited to the Licensor shall be deemed recouped by
GTIS. If in respect of any royalty payment period royalties are
available for recoupment of the Atari Advance under any one or more of
the distribution and license agreements entered into under the Atari
Agreements, the GTIS Master Agreement and the GTIS Master Option and
License Agreement dated December 28, 1994, as amended (the "GTIS Master
PC Agreement"), the Atari Advance shall be recouped from royalties in
the following order of priority: (i) royalties payable under
distribution and license agreements entered into under the Atari
Agreements; (ii) royalties payable under distribution and license
agreements entered into under the GTIS Master PC Agreement; and (iii)
royalties payable under distribution and license agreements entered
into under the GTIS Master Agreement.
10. WMS hereby confirms to GTIS that it is WMS' present
intention that it will maintain a separate Atari Group games design
organization and that any member of the design teams working for that
organization will work solely on the creation of Atari Games. WMS further
confirms that it will use all reasonable efforts to maintain such separate
organization.
11. In the event of conflicts between the provisions of the GTIS
Master Home Video Agreement and the Home Video Game Distribution and License
Agreement, the
13
<PAGE> 14
provisions of the GTIS Master Home Video Agreement shall prevail.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WMS INDUSTRIES INC
By: /s/ Neil D. Nicastro
-------------------------------------
WILLIAMS ELECTRONICS GAMES, INC.
By: /s/ Neil D. Nicastro
-------------------------------------
MIDWAY MANUFACTURING COMPANY
By: /s/ Neil D. Nicastro
-------------------------------------
WILLIAMS ENTERTAINMENT INC.
By: /s/ Byron Cook
-------------------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
-------------------------------------
14
<PAGE> 15
SCHEDULE I
ATARI LIBRARY
(Not Including Projects in Process)
RELEASED COIN-OP TITLES
DATE PRODUCT
Nov - 72 Pong
Jul - 83 Space Race
Sep - 73 Pong Doubles
Oct - 73 Gotcha Color
Oct - 73 Gotcha
Oct - 73 Elimination (KEE)
Feb - 74 Super Pong
Feb - 74 Rebound
Mar - 74 Spike (KEE)
Mar - 74 Quadrapong
Mar - 74 Gran Trak 10
Apr - 74 Formula K (KEE)
Apr - 74 World Cup
Apr - 74 World Cup CKT
May - 74 Pong CKT
June - 74 Touch Me
Jul - 74 Twin Racer (KEE)
Jul - 74 Trak 10
Aug - 74 Gran Trak 20
Aug - 74 Puppy Pong
Aug - 74 Trak 20
Sep - 74 Dr. Pong
Oct - 74 Pin Pong
Nov - 74 Tank
Nov - 74 Qwak
Jan - 75 Dodgeball
Jan - 75 Pursuit
Apr - 75 Indy 800 (KEE)
Apr - 75 Highway
May - 75 Crossfire (KEE)
May - 75 Tank II (KEE)
Jun - 75 Anti Aircraft
Jun - 75 Anti Aircraft
<PAGE> 16
Jul - 75 Goal IV
Sep - 75 Jaws
Oct - 75 Steeplechase
Oct - 75 Crash N Score
Oct - 75 Jet Fighter
Dec - 75 Jet Fighter CKT
Jan - 76 Stunt Cycle
Mar - 76 Outlaw
Apr - 76 Tank 8 (KEE)
Apr - 76 Quiz Show (KEE)
Apr - 76 Breakout
May - 76 Indy 4
Jul - 76 Breakout CKT
Jul - 76 Cops N Robbers
Jul - 76 Fly Ball (KEE)
Aug - 76 Lemans
Oct - 76 Night Driver
Nov - 76 Sprint II (KEE)
Nov - 76 F-I
Nov - 76 The Atarians Pin
Jan - 77 Dominos
Feb - 77 Dominos CKT
Apr - 77 Triple Hunt
Apr - 77 Triple Hunt Single
Apr - 77 Night Driver SD
May - 77 Sprint 8 (KEE)
Jun - 77 Time 2000 Pin
Jun - 77 Pool Shark
Jun - 77 Drag Race (KEE)
Jul - 77 Starship
Sep - 77 Super Bug (KEE)
Sep - 77 Two Game Module
Sep - 77 Airborne Aveneger Pin
Oct - 77 Destroyer
Nov - 77 Canyon Bomber
Dec - 77 Sprint 4
Jan - 78 Sprint 1
Feb - 78 Ultra Tank (KEE)
Feb - 78 Middle Earth Pin
Mar - 78 Sky Raider
Mar - 78 Tournament Table
Apr - 78 Avalanche
Jun - 78 Fire Truck
Jun - 78 Sky Diver
<PAGE> 17
Jul - 78 Smokey Joe
Sep - 78 Super Breakout
Sep - 78 Space Rider Pin
Oct - 78 Atari Football
Nov - 78 Orbit
Feb - 79 Video Pinball
Mar - 79 Superman Pin
Apr - 79 Hercules Pin
May - 79 Basketball
May - 79 Subs
Jun - 79 Baseball
Aug - 79 Lunar Lander
Apr - 79 4PL Atari Football
Nov - 79 Asteroids
Apr - 80 Asteroids CKT
Apr - 80 Soccer
Apr - 80 Monte Carlo
Jun - 80 Asteroics Cabaret
Jun - 80 Missle Command
Aug - 80 Missle Command CKT
Sep - 80 Missle Command Cabaret
Sep - 80 Missle Command SD
Nov - 80 Battle Zone
Dec - 80 Battle Zone Cabaret
Apr - 81 Asterids Deluxe Cabaret
Apr - 81 Warlords
Apr - 81 Warlords CKT
May - 81 Asteroids Deluxe
May - 81 Asteroids Deluxe CKT
May - 81 Red Baron SD
Jun - 81 Centipede
Jun - 81 Red Baron
Jun - 81 Battle Zone Open Face
Jul - 81 Centipede CKT 13"
Jul - 81 Centipede CAB
Sep - 81 Centipede CKT 19"
Oct - 81 Tempest
Dec - 81 Tempest CKT
Dec - 81 Tempest Cabaret
Feb - 82 Space Duel
Apr - 82 Dig Dug
Apr - 82 Space Duel CKT
Jun - 82 Kangaroo
Jun - 82 Dig Dug CKT
<PAGE> 18
Jun - 82 Dig Dug CAB
Jun - 82 Gravitar
Nov - 82 Millipede
Nov - 82 Liberator
Nov - 82 Quantum
Nov - 82 Pole Position
Nov - 82 Pole Position SD
Feb - 83 Xevious
Feb - 83 Black widow
Feb - 83 Milipede CKT
Mar - 83 Food Fight
May - 83 Arabian
May - 83 Star Wars
May - 83 Star Wars SD
May - 83 Food Fight CKT
Jul - 83 Crystal Castles
Nov - 83 Major Havoc
Nov - 83 Pole Position II
Nov - 83 Crystal Castles CKT
Jan - 84 Firefox
Feb - 84 Firefox SD
Mar - 84 TX-1 SD
Jun - 84 I, Robot
Sep - 84 Return of the Jedi
Dec - 84 Marble Madness SYS 1
Mar - 85 Empire Kit
Apr - 85 Paperboy SYS 2
Jul - 85 Pack Rat SYS 1
Jul - 85 Pack Rat SYS (KIT)
Jul - 85 Temple of Doom SYS 1
Jul - 85 Temple of Doom Kit
Oct - 85 Gauntlet
Apr - 86 Super Sprint
May - 86 Guantlet 2 Player
Jul - 86 Road Runner SYS 1
Jul - 86 Road Runner Kit
Aug - 86 Gauntlet II
Aug - 86 Gauntlet II 4 player kit
Aug - 86 Gauntlet II 2 player kit
Sep - 86 Champ Sprint SYS 2
Sep - 86 Champ Sprint Kit
Dec - 86 720
Feb - 87 Rolling Thunder
Mar - 87 Road Blaster SYS 1
<PAGE> 19
Mar - 87 Road Blaster Kit
Mar - 87 Road Blaster SD
May - 87 Dunk Shot
Jul - 87 A.P.B.
Jul - 87 Dragon Spirit
Sep - 87 RBI Baseball Kit
Nov - 87 Xybots
Dec - 87 Pacmania
Feb - 88 Blasteroids
Apr - 88 Galaga '88
Apr - 88 Galaga '88 Kit
Apr - 88 Vindicators
May - 88 Pot Shot
May - 88 Final Lap SD
Jun - 88 Toobin
Aug - 88 Assault
Sep - 88 Cyberball
Oct - 88 Final Lap UR
Feb - 89 Tetris Kit
Feb - 89 Hard Drivin SD
Feb - 89 Splatterhouse PCB
Feb - 89 Vindicator Kits
Jun - 89 Hard Drivin Compact
Jun - 89 Escape
Jun - 89 Escape Kit
Aug - 89 Cyberball 2072 4 player
Sep - 89 Cyberball 2072 2 player
Sep - 89 Stunrunner
Oct - 89 Cyberball 2072 Conv. Kit
Nov - 89 Cyberball 2 PL Univ. Kit
Nov - 89 Skull & Crossbones
Nov - 89 Skull & Crossbones Kit
Dec - 89 4 Trax Moving
Jan - 90 Badlands
Jan - 90 Badlands Kit
Jan - 90 Cyberball vs. Kit
Feb - 90 Klax
Feb - 90 Klax Cabaret
Feb - 90 Klax Kits (Incl. Japan)
Apr - 90 4 Trax Stationary
Jun - 90 Gumball Rally
Jun - 90 Hydra
Jun - 90 Hydra Kits
Jul - 90 ThunderJaws Kits
<PAGE> 20
Aug - 90 Pitfighter
Aug - 90 Race Drivin SD
Oct - 90 Race Drivin SD Conv.Kits
Nov - 90 Tetris Cabaret
Nov - 90 Shuuz
Nov - 90 Shuuz Kits
Dec - 90 Race Drivin Compact
Feb - 91 Rampart
Mar - 91 Pitfighter 2 PL Kits
Apr - 91 Batman Kits
Apr - 91 Rampart Kits Incl. Japan
Apr - 91 Race Drivin UR Conv. Kits
Apr - 91 Race Drivin Intl. Kits
May - 91 Race Drivin Panaorama
Jun - 91 Road Riot
Sep - 91 Steel Talons
Oct - 91 Off the Wall Kit
Apr - 92 Relief Pitcher Game
May - 92 Relief Pitcher Kit
Jun - 92 Guardians of the Hood
Jul - 92 Guardians of the Hood Kit
Jul - 92 Moto Frenzy Deluxe
Sep - 92 Moto Frenzy Mini
Nov - 92 Space Lords
Mar - 93 Knuckle Bash Kit
Jun - 93 World Rally Kits
Oct - 93 Showcase '33
Jul - 94 T-MEK
Aug - 94 Primal Rage Showcase 33
Sep - 94 Primal Rage Family Cabinet
Oct - 94 Cops
Sep - 95 Hoop It Up
Nov - 95 Area 51 33" Showcase
Nov - 95 Area 51 25"
<PAGE> 21
RELEASED CONSUMER TITLES
DATE TITLE FORMAT
- ---- ----- ------
After Burner NES
Alien Syndrome NES
Fantasy Zone NES
88 Gauntlet NES
Klax NES
Ms. Pacman NES
88 Pacman NES
Pacmania NES
88 RBI Baseball NES
RBI 2 Baseball NES
RBI 3 Baseball NES
Road Runner NES
Rolling Thunder NES
Shinobi NES
Skull & Crossbones NES
Super Sprint NES
May - 89 Tetris NES
Temple of Doom NES
Toobin NES
Vindicators NES
<PAGE> 22
Jun. - 95 RBI 95 32X
Oct. - 94 Battlecorps Sega CD AFL
Feb. - 95 BC Racers Sega CD AFL
Nov. - 94 Lawnmowerman Sega CD AFL
Dec. - 94 Soulstar Sega CD AFL
Dec. - 95 Wayne Gretsky PC CD ROM
Sep. - 95 Primal Rage PC CD ROM
Nov. - 94 Rise of the Robots PC CD ROM
Nov. - 94 Rise of the Robots PC Floppy Disk
Jun. - 95 Striker Europe CD ROM
Nov. - 94 Rise of the Robots Europe CD ROM
Sep. - 95 Primal Rage Europe CD ROM
Jun. - 95 Striker Europe 1Disk
Jun. - 95 Rise of the Robots Europe Disk
Jun. - 95 Rise of the Robots Amiga-Europe
PGA Tour Golf Europe Game Gear
KLAX Europe Game Gear
Marble Madness Europe Game Gear
Paperboy Europe Game Gear
Popils Europe Game Gear
Dec. - 94 PGA Tour II Europe Game Gear
Jun. - 95 Rise of the Robots Europe Game Gear
<PAGE> 23
World Cup Soccer Europe Game Gear
Aug. - 95 Primal Rage Gameboy
Mar. - 95 Kawasaki Superbike Game Gear AFL
Dec. - 93 Desert Strike Game Gear AFL
Dec. - 93 Formula 1 Game Gear AFL
Prince of Persia Game Gear AFL
Super Space Invaders Game Gear AFL
Mar. - 95 Kawasaki Superbike Genesis
Davis Cup Tennis Genesis
Dragon's Fury Genesis
Dick Vitale Genesis
Basketball
Dec. - 93 Dragon's Revenge Genesis
Nov. - 93 Gauntlet 4 Genesis
Nov. - 94 Generations Lost Genesis
Grindstormer Genesis
Hard Driven Genesis
Klax Genesis
Nov. - 94 Lawnmowerman Genesis
Ms. Pacman Genesis
Paperboy 2 Genesis
Paperboy Genesis
<PAGE> 24
Pitfighter Genesis
Pacmania Genesis
Nov. - 93 Awesome Possum Genesis
Prince of Persia Genesis
Dec. - 93 Race Driven Genesis
Aug. - 95 Primal Rage Genesis
Rampart Genesis
RBI 93 Genesis
RBI 94 Genesis
RBI 3 Basketball Genesis
RBI 4 Genesis
Road Blasters Genesis
Nov. - 94 Red Zone Genesis
Sylvester & Tweety Genesis
Steel Talons Genesis
Jun. - 95 Wayne Gretzky Genesis
Bubba N' Stix Genesis AFL
Nov. - 93 Formula 1 Genesis AFL
James Bond Genesis AFL
Nov. - 94 Marko & His Magic Genesis AFL
Soccer Ball
MIG 29 Genesis AFL
Chuck Rock II Game Gear
<PAGE> 25
Dec. - 93 PGA Tour Golf Game Gear
Klax Game Gear
Marble Madness Game Gear
Paperboy 2 Game Gear
Paperboy Game Gear
Nov. - 94 PGA Tour II Game Gear
Popils Game Gear
Aug. - 95 Primal Rage Game Gear
Nov. - 94 RBI 94 Game Gear
Dec. - 94 Rise of the Robots Game Gear
World Cup Soccer Game Gear
Oct. - 95 Power Drive Rally Jaguar
Dec. - 95 Primal Rage Jaguar CD
Davis Cup Tennis Mega Drive-Europe
Dragon's Fury Mega Drive-Europe
Dick Vitale
Basketball
Dragon's Revenge Mega Drive-Europe
Gauntlet 4 Mega Drive-Europe
Hard Driven Mega Drive-Europe
Kawasaki Superbike Mega Drive-Europe
Klax Mega Drive-Europe
Lawnmowerman Mega Drive-Europe
<PAGE> 26
Paperboy Mega Drive-Europe
Paperboy 2 Mega Drive-Europe
Pitfighter Mega Drive-Europe
Pacmania Mega Drive-Europe
Rampart Mega Drive-Europe
RBI 94 Mega Drive-Europe
Nov. - 94 Red Zone Mega Drive-Europe
Aug. - 94 Sylvester & Tweety Mega Drive-Europe
Steel Talons Mega Drive-Europe
Mar. - 95 Mega Swiv Mega Drive-Europe
A.C. Adapter Gameboy
A.C. Adapter Genesis
A.C. Adapter SNES
A.C. Adapter Game Gear
Control Pad Genesis
Control Pad NES
Control Pad SNES
Hi-Freq. Control Pad Genesis
Hi-Freq. Control Pad NES
Hi-Freq. Control Pad SNES
Hi-Freq. Magnifier Game Gear
<PAGE> 27
Hi-Freq. Night Sight Gameboy
Hi-Freq. Power Clip Gameboy
w/adaptor
Hi-Freq. Power Clip Game Gear
R.F. Switch All
Night Sight Gameboy
Power Clip w/A.C. Gameboy
adaptor
Power Clip Gameboy
Wayne Gretzky Kit Rest of World
Wayne Gretzky Mega Drive-Rest of World
Kawasaki Superbike SNES-Rest of World
Primal Rage Kit Rest of World
Sep. - 95 Primal Rage PC CD ROM-Rest of World
Sep. - 95 Primal Rage Gameboy-Rest of World
Aug. - 95 Primal Rage SNES-Rest of World
Sep. - 95 Primal Rage Mega Drive-Rest of World
Jul. - 95 Striker Spindle PC CD ROM-Rest of World
Virtua Racing Saturn-Rest of World
Dec. - 95 Last Gladiators Saturn
Nov. - 95 Virtua Racing Saturn
Sep. - 93 Robo Aleste Sega CD
PGA Tour Golf Master System-Europe
<PAGE> 28
Klax Master System-Europe
Ms. Pacman Master System-Europe
Rampart Master System-Europe
Dec. - 95 Wayne Gretzky SNES
Dec. - 95 Kawasaki Superbike SNES
Aug. - 95 Primal Rage SNES
Jun. - 95 Super RBI SNES
Blasteroids Computer Software
Rolling Thunder Computer Software
Dec. - 95 Primal Rage Sony PSX
Dec. - 95 Zero Divide Sony PSX
Klax NEC Turbografix
Return Fire Sony PSX
Constructor Sony PSX
T-MEK Sony PSX
Area 51 Sony PSX
Wayne Gretzky II Sony PSX
Wheels Sony PSX
<PAGE> 29
SCHEDULE 1
PROJECTS IN PROCESS
(ATARI PC GAMES)
TITLE PLATFORM
- ----- --------
Area 51 CD-ROM
Constructor Win '95/Mac-CD
Crisis Win '95
Dark Hermetic Order PC CD-ROM
Gretzky Hockey PC CD-ROM
Gretzky II Win '95
Primal Rage Mac-CD
RBI 96 IBM PC; CD-ROM
Return Fire CD-ROM
T-Mek PC; CD-ROM
<PAGE> 30
SCHEDULE 2
PROJECTS IN PROCESS
(HOME VIDEO GAMES)
TITLE PLATFORM
- ----- --------
Area 51 Saturn; PSX
Constructor PSX
Gretzky II PSX
Gretzky Arcade Ultra 64
Last Gladiators Saturn
Power Drive Jaguar
Primal Rage Saturn; PSX
Return Fire PSX; Saturn
T-Mek PSX
Toonfighter PSX
Virtua Racing Saturn
Wheels (Driver) PSX
Zero Divide PSX
<PAGE> 1
EXHIBIT 10.14
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
MASTER OPTION AND LICENSE AGREEMENT
FOR ATARI HOME VIDEO GAMES
This Master Option and License Agreement ("Agreement") is made and entered
into the 27th day of March, 1996, by and between WMS INDUSTRIES INC. ("WMS"), a
Delaware corporation with offices at 3401 North California Avenue, Chicago,
Illinois 60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware
corporation with offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
WHEREAS, Williams Interactive Inc. ("WII"), a wholly-owned subsidiary of
WMS, has entered into an agreement with Warner Communications Inc. for the
acquisition of the stock of Atari Games Corporation, a California corporation
("AGC"); and
WHEREAS, AGC is engaged in the business of designing, manufacturing and
selling coin-operated amusement games and software products for dedicated home
video game systems and multipurpose home computers; and
WHEREAS, GTIS is engaged in the business of publishing, manufacturing and
distributing entertainment software products; and
<PAGE> 2
WHEREAS, GTIS desires to acquire certain rights from WMS and AGC and other
subsidiaries of AGC with respect to Games, as such term is defined herein, and
WMS desires to grant and to cause AGC to grant such rights to GTIS;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Accepted Game" shall mean any Game with respect to which GTIS has
received a license or has exercised an option to acquire a license provided for
in Section 2 hereof.
1.2 "AGC" shall have the meaning ascribed in the first recital of this
Agreement.
1.3 "Alternative Royalty" shall have the meaning ascribed in Schedule "B" of
the Atari Home Video Game Distribution and License Agreement.
1.4 "Atari Game" shall mean (i) any game developed or acquired by or on behalf
of AGC or entities which were affiliates of AGC prior to AGC being acquired by
WII pursuant to the Stock Purchase Agreement, including, without limitation,
those games listed on Schedule 1 hereto, and any adaptations of such games for
other platforms, and (ii) any game currently in development or developed
subsequent to such acquisition by or on behalf of AGC or a member of the Atari
Group, or developed, in whole or in substantial part, by any person or persons
who were employees of AGC or a member of the Atari Group as of the closing date
of such acquisition and who are employees of any member of the WMS Group at the
time of such development, and any adaptations of such games for other
platforms. For purposes of this
2
<PAGE> 3
Section, employees shall be deemed to include independent contractors who work
a substantial portion of their time at the facilities of any member of the WMS
Group.
1.5 "Atari Group" shall mean AGC, or any entity, a majority of whose capital
stock is owned directly or indirectly by AGC or with respect to which during
the term of this Agreement, AGC, directly or indirectly, has the legal power,
without the consent of any third party, to direct the acquisition of rights to
or exploitation of Games on Designated Consumer Game Platforms.
1.6 "Atari Home Video Game Distribution and License Agreement" shall mean an
agreement for the license of an Accepted Game for use solely on a specific
Designated Consumer Game Platform in the form of Exhibit A annexed hereto, as
the same may be amended from time to time by written agreement of the parties
thereto.
1.7 "Delivery Date" shall have the meaning ascribed in Section 2.7 hereof.
1.8 "Designated Consumer Game Platforms" shall mean any of the Sony(R),
Nintendo(R) or Sega(R) dedicated home video game hardware platforms or other
dedicated home video game hardware platforms having a microprocessor with a 32
bit or higher capacity (excluding SNES and Sega Genesis), on which Game software
can be played utilizing cartridges, CD-ROM disks or other devices which may
hereafter replace or supplement cartridges or CD-ROM disks in operating systems
now known or hereafter developed for use on dedicated home video game hardware
platforms. Designated Consumer Game Platforms shall not, for purposes of this
Agreement, include (a) any of the Atari Jaguar(R) system, the 3D-O(R) system, or
their respective successors (including any enhancements, improvements or
updates), except only to
3
<PAGE> 4
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
the extent that the Atari Group shall itself (and not through any licensee or
sublicensee) actually release for commercial shipment in the normal course of
business any Games on such hardware platforms in the United States, or any
hand held games, or any multipurpose home or personal computer system or any
electronic distribution or on-line interactive computer game systems or
platforms.
1.9 "Early Termination Event" shall mean AGC ceasing to be at least 50.1%
owned by a member of the WMS Group, or the Atari Group transferring a majority
of its intellectual property assets and licenses to a person or entity who is
not a member of the WMS Group.
1.10 "Effective Date" shall mean the date WII closes the acquisition of AGC
pursuant to the Stock Purchase Agreement.
1.11 "First Release" or "First Released" shall mean the date of the first
commercial shipment of a Game in the normal course of business (and not merely
for test purposes).
1.12 "Full Price" shall mean the price of Games which have not been marked down
or discounted by more than * from the original list price of the Game.
Markdowns or discounts shall include rebates or credits (other than the
cooperative advertising allowances which are unrelated to price protection)
granted within one year of the date of the First Release of the Game).
1.13 "Game" shall mean any home video game designed for play on a specific
Designated Consumer Game Platform which is an Atari Game and which has been
4
<PAGE> 5
released for commercial shipment in the normal course of business by (i) any
member of the WMS Group, or (ii) by any licensee of the WMS Group on such
Designated Consumer Game Platform in each case for sale in commercial
quantities in the United States in the normal course of business, but excluding
any such home video game with respect to which the Atari Group shall, prior to
the date hereof, have granted rights (or any option, right of first refusal or
negotiation or other ability to obtain rights which may be subsequently
exercised) to any third party, including without limitation any sublicensee of
the Atari Group, to manufacture, distribute or sell such home video game on
such specific Designated Consumer Game Platform within the Licensed Territory,
including any renewals or extensions thereof resulting from the exercise of
previously granted rights. For purposes of this section, employees shall be
deemed to include independent contractors who work a substantial portion of
their time at the facilities of any member of the WMS Group. Set forth on a
schedule to a letter dated the date hereof and signed by WMS and GTIS is a list
of all material agreements known to WMS pursuant to which the Atari Group has,
prior to the date hereof, granted rights to manufacture, distribute and sell
such home video games on Designated Consumer Game Platforms within the Licensed
Territory, but excluding any agreements pursuant to which the Atari Group has
granted rights to home video games based on games which have heretofore been
released for commercial shipment in the normal course of business by the Atari
Group or by any sublicensee of the Atari Group as coin-operated video or
pinball games or on any dedicated home video game platform or agreements
pursuant to which the Atari Group has granted rights to any derivative or
sequel to any such previously released coin-operated video, pinball or home
video game. A home video game shall
5
<PAGE> 6
be deemed a separate Game with reference to the specific Designated Consumer
Game Platform on which it has been designed for play.
1.14 "Game Version", or version of a Game, or any similar phrase, whether or
not capitalized, shall mean the version of a Game designed to play on a
specific Designated Consumer Platform.
1.15 "GTIS" shall mean GTIS or any affiliate of GTIS to whom any rights to
exploit any Games granted hereunder may be sublicensed. An affiliate of GTIS
shall refer to an entity, a majority of whose capital stock is owned directly
or indirectly by GTIS or with respect to which during the term of this
Agreement, GTIS, directly or indirectly, has the legal power without the
consent of any third party to direct the manufacture, distribution or sale of
Games.
1.16 "GTIS Master Home Video Agreement" shall mean the GTIS Master Option and
License Agreement (Home Video Games) dated March 31, 1995, as amended, among
WMS, Williams Electronics Games, Inc., Midway Manufacturing Company, Williams
Entertainment Inc. and GTIS.
1.17 "GTIS Master PC Agreement" shall mean the GTIS Master Option and License
Agreement dated December 28, 1994, as amended, among WMS, Williams Electronics
Games, Inc., Midway Manufacturing Company, Williams Entertainment Inc. and
GTIS.
1.18 "Licensed Territory" shall have the meaning ascribed in Section 3.1 of
the Atari Home Video Game Distribution and License Agreement.
6
<PAGE> 7
1.19 "Marketing Area" shall have the meaning ascribed in Section 3.3 of the
Atari Home Video Game Distribution and License Agreement.
1.20 "Master Atari PC Agreement" shall mean the Master Option and License
Agreement for Atari PC Games being executed simultaneously herewith.
1.21 "Master Disk" shall mean a CD-ROM disk or floppy disk, or any other stand
alone device which may hereafter replace or supplant CD-ROM or floppy disks,
containing the source code utilized by the Atari Group for an Accepted Game
released or intended to be released in the United States.
1.22 "Minimum Guaranteed Advance Royalty" shall have the meaning ascribed in
Section 3 hereof.
1.23 "New Game Acceptance Notice" shall have the meaning ascribed in Section 2.3
hereof.
1.24 "New Game Option Notice" shall have the meaning ascribed in Section 2.3
hereof.
1.25 "New Game Option Notice Date" shall have the meaning ascribed in Section
2.3 hereof.
1.26 "North America" shall mean (a) the United States of America, its
territories, possessions, and United States military installations worldwide,
(b) Canada and (c) Mexico.
1.27 "Notice of Election" shall have the meaning ascribed in Section 9 hereof.
7
<PAGE> 8
1.28 "Option Period" shall mean the period commencing on the Effective Date and
ending on the earlier to occur of (i) the expiration date, including any
extensions thereof, of GTIS' first option to acquire licenses pursuant to
Section 2.1 of the GTIS Master Home Video Agreement, or (ii) the first date
after the Effective Date on which an Early Termination Event occurs.
1.29 "Pirate" shall mean an individual or entity which counterfeits a game or
sells counterfeit games.
1.30 "Proposed Game" shall have the meaning ascribed in Section 2.3 hereof.
1.31 "Renewal Option Period" shall have the meaning ascribed in Section 2.1
hereof.
1.32 "Renewal Option Year" shall have the meaning ascribed in Section 2.1
hereof.
1.33 "Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated
February 23, 1996 between Warner Communications Inc. and WII pursuant to which
Warner Communications Inc. has agreed to sell and WII has agreed to purchase
all of the outstanding stock of AGC.
1.34 "Weighted Average Gross Profits" shall have the meaning ascribed in
Schedule "B" of the Atari Home Video Game Distribution and License Agreement.
1.35 "WII" shall have the meaning ascribed in the first recital of this
Agreement.
8
<PAGE> 9
1.36 "WMS Group" shall mean WMS, or any subsidiary, affiliate or other entity,
a majority of whose capital stock is owned directly or indirectly by WMS or
with respect to which during the term of this Agreement, WMS, directly or
indirectly, has the legal power, without the consent of any third party, to
direct the acquisition of rights to or exploitation of Games on Designated
Consumer Game Platforms.
2. GRANT AND TERMINATION OF OPTION; EXERCISE OF OPTION.
2.1 Effective from and after the Effective Date, the Atari Group hereby grants
to GTIS a first option to acquire a license, in the form of the Atari Home
Video Game Distribution and License Agreement, to manufacture, distribute,
sell, sublicense and subdistribute versions of the Games for use solely on
specific Designated Consumer Game Platforms, with respect to Games which become
Accepted Games during the Option Period, provided that such Games are actually
released by the Atari Group or its licensees in the United States within twelve
(12) months following the expiration of the Option Period.
Royalties payable on sales of Accepted Games with respect to which GTIS
has received a license or exercised an option to acquire a license during the
Renewal Option Period shall be subject to increase, as of the commencement of
the Renewal Option Period or any subsequent Renewal Option Year, to reflect
increases in GTIS' Weighted Average Gross Profits as a percentage of GTIS'
sales of Accepted Games during the Option Period or during the prior Renewal
Option Year as provided in Schedule "B" to the Atari Home Video Game
Distribution and License Agreement. Renewal Option Period and Renewal Option
Year shall have the meanings ascribed to such terms in Section 2.1 of the GTIS
Master Home Video Agreement.
9
<PAGE> 10
2.2 The Atari Group shall not grant a license to any third parties to
manufacture, distribute and sell versions of a Game for use on any Designated
Consumer Game Platform if such Game would be subject to GTIS' first option right
to manufacture, distribute and sell versions of such Game on such Designated
Consumer Game Platform, as specified in Section 2.1 hereof, until such time as
GTIS shall have declined to acquire a license, or the option period specified in
Sections 2.3 and 2.4 hereof, whichever is applicable, shall have expired, or the
applicable Atari Home Video Game Distribution and License Agreement shall
otherwise permit. GTIS understands, acknowledges and agrees that (a) on the
Effective Date, the Atari Group's library of Games, projects in development and
subsequent versions of Games may be subject to rights held by third parties,
including affiliates of Warner Communications Inc. who are not members of the
Atari Group; any license acquired by GTIS hereunder shall be subject to such
third party rights, and the form of Atari Home Video Distribution and License
Agreement will be deemed modified to the extent so required; (b) with respect to
Games manufactured by the Atari Group under license from third parties, the
rights granted by the Atari Group to GTIS (i) cannot exceed the rights obtained
by the Atari Group with respect to such Games, (ii) will be limited to the
Licensed Territory, and (iii) are subject to all limitations imposed on the
Atari Group by such third party licensors, including limitations on the Atari
Group's right to sublicense or subdistribute, and the form of Atari Home Video
Game Distribution and License Agreement will be deemed modified to the extent so
required, (c) under certain circumstances the ownership of the Atari Group may
revert to Warner Communications Inc. pursuant to the Stock Purchase Agreement
and documents executed in connection therewith; and (d) although the Atari Group
is developing Games in the normal course of business, the
10
<PAGE> 11
Atari Group is under no obligation to develop Games or to present any minimum
number of Games to GTIS under this Agreement. GTIS shall be provided the
opportunity to review all third party agreements existing on the Effective Date
relating to Games with respect to which GTIS may acquire rights hereunder,
subject to any applicable confidentiality provisions in such agreements.
2.3 If the Atari Group has determined or shall determine to develop or acquire
rights in a Game for play on a Designated Consumer Game Platform which the
Atari Group intends to release in the United States during the Option Period or
within twelve (12) months thereafter, including Games which were in the Atari
Group library on the Effective Date but which are re-released with new
copyright notices or other changes after the Effective Date, (a "Proposed
Game"), the Atari Group shall notify GTIS in writing, as soon as practicable,
with respect to such determination and shall furnish to GTIS any tentative
development schedule for such Proposed Game. Such tentative development
schedule shall be subject to change at any time and from time to time and the
Atari Group reserves the right to abandon, suspend, or otherwise delay the
development of such Proposed Game in its sole and absolute discretion,
provided, however, that the Atari Group shall use reasonable efforts to keep
GTIS apprised of material scheduling changes and/or the achievement of
milestones in connection with the development of such Proposed Game. The Atari
Group shall, as soon as practicable, notify GTIS in writing with respect to (a)
the characteristics and method of play of such Proposed Game, (b) any material
limitations or other terms and conditions which may affect the scope of the
license which may be granted to GTIS (including copies of relevant contractual
provisions where permitted), (c) the amount or method of determining third
party fees and royalties payable
11
<PAGE> 12
in connection therewith, and (d) the date on which the Atari Group proposes to
First Release the Proposed Game in the United States (the "New Game Option
Notice"). The Atari Group shall use reasonable efforts to advise GTIS with
respect to all of the information required to be included in the New Game
Option Notice, as provided above, at least one hundred and twenty (120) days
prior to the proposed release date of the Proposed Game by the Atari Group in
the United States, provided, however, that GTIS acknowledges and agrees that
such information may not then be available to the Atari Group and the Atari
Group may not have fully determined or negotiated all material limitations or
other terms and conditions which may affect the scope of the license or Third
Party Fees and Royalties payable with respect thereto. The date of such New
Game Option Notice is hereinafter referred to as the "New Game Option Notice
Date." With respect to each Proposed Game as to which GTIS receives a New Game
Option Notice, as hereinabove provided, GTIS shall have a period of sixty (60)
days in which to notify AGC in writing that it either elects or declines to
exercise its option to license the Proposed Game. A notice that GTIS elects to
exercise its option to have the Proposed Game is referred to as a "New Game
Acceptance Notice." Any New Game Acceptance Notice given by GTIS shall in all
events be conditioned upon and subject to (i) the actual release of the Game by
the Atari Group in the United States within twelve (12) months following the
end of the Initial Option Period or any Renewal Option Year as those terms are
defined in the GTIS Master Home Video Agreement and (ii) the prior release of
coin-operated versions of the Game, if any, by the Atari Group no later than
the end of the corresponding Initial Option Period or Renewal Option Year. As
soon as practicable following receipt of (a) the New Game Acceptance Notice,
and (b) notice from the Designated Consumer Game Platform manufacturer of its
acceptance of the Proposed
12
<PAGE> 13
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Game for sale in the United States, the Atari Group shall promptly furnish to
GTIS a Master Disk with respect to such Game as well as one NTSC and one PAL
version of such Master Disk. The Atari Group shall also furnish to GTIS, as
soon as reasonably available, (i) the beta version of the Game, (ii) text files
and the text that appears in bit map files, and printed copies of scripts used
for audio components of CD-ROM versions of the Proposed Game, for purposes of
translating the Proposed Games into languages other than English (as
contemplated in the Atari Home Video Game Distribution and License Agreement),
and (iii) copies of artwork, instruction manuals, and other packaging, labeling
and promotional materials to be used by the Atari Group with respect to such
Proposed Game substantially in commercially reproducible form. Except as
otherwise specifically provided below, GTIS shall be solely responsible for all
costs and out of pocket expenses required to reprogram a Master Disk for use in
connection with the sale of Accepted Games, including, without limitation,
editorial changes or adaptions to local markets, changes required by all
manufacturers of Designated Consumer Game Platforms and local rating boards or
similar governmental agencies in the Licensed Territory. The Atari Group shall
bear costs up to * Dollars for editorial changes per Accepted Game required by
any German or European approval boards for modifications to Accepted Games,
subject in all events to a maximum total required expenditure by the Atari Group
during the Initial Option Period of * Dollars and * Dollars during each Renewal
Option Year. GTIS and the Atari Group shall otherwise discuss in good faith any
sharing of costs of other editorial changes, but the Atari Group shall in no
event have any obligation to bear any additional costs of such editorial changes
unless it shall specifically agree in writing with respect thereto. Although
the Atari Group shall
13
<PAGE> 14
make reasonable efforts to advise GTIS with respect to the development schedule
of a Proposed Game and the intended First Release date of such Proposed Game by
the Atari Group in the United States, nothing herein shall be deemed to require
the Atari Group to alter, amend, delay, or suspend its development schedule
with respect to such Proposed Game, or its First Release date in the United
States.
2.4 Any Proposed Game or Game as to which GTIS has exercised its option and
furnished to the Atari Group a New Game Acceptance Notice within the notice
period specified in Section 2.3 above shall become an "Accepted Game" for
purposes of this Agreement, provided that such Game shall have actually been
released by the Atari Group in the United States within twelve (12) months
following expiration of the Option Period, and provided further that
coin-operated versions of the Game, if any, shall have previously been released
by the Atari Group during the Option Period. With respect to each Accepted
Game, GTIS and the member of the Atari Group which has released such Game shall
enter into an Atari Home Video Game Distribution and License Agreement which
shall be dated as of the date of the New Game Acceptance Notice. If either of
such parties shall delay or wrongfully refuse to enter into an Atari Home Video
Game Distribution and License Agreement with respect to any Accepted Game, then,
in addition to any other rights of the non-defaulting party hereunder, at the
option of the non-defaulting party, such Atari Home Video Game Distribution and
License Agreement shall be deemed to have been entered into as of the date on
which GTIS shall have exercised its option to acquire the license of such
Accepted Game as provided herein. GTIS understands and agrees that it will have
no rights whatsoever in respect of any Game which does not become an Accepted
Game in accordance with the terms of this Agreement and for which
14
<PAGE> 15
an Atari Home Video Game Distribution and License Agreement is not duly executed
(or deemed executed as provided above), and the Atari Group may exploit its
rights in any Game which does not become an Accepted Game in any manner it sees
fit, free and clear of this Agreement provided, however, that if GTIS shall fail
or decline to accept a Proposed Game as provided in Section 2.3 above, and the
Atari Group shall thereafter make material changes in the programming of the
Game or in the amount of any Third Party Fees and Royalties payable with respect
thereto, then the Atari Group shall furnish to GTIS a new New Game Option Notice
with respect to such Game as so changed and GTIS shall thereafter have the right
to accept such Game as changed in the manner provided in Section 2.3 above. The
Atari Group shall also be entitled to exploit its rights with respect to any
Game and to sell and distribute such Game, free and clear of this Agreement, in
any Marketing Area with respect to which GTIS' right to sell and distribute such
Game has been suspended or revoked (or has become non-exclusive) as provided in
Section 2.7 below and Section 3.3 of any Atari Home Video Game Distribution and
License Agreement, provided however, that if the Atari Group shall thereafter
make material changes in the programming of such Game or in the amount of any
Third Party Fees and Royalties payable with respect thereto, then the Atari
Group shall furnish to GTIS a new New Game Option Notice with respect to such
Game as so changed and GTIS shall thereafter have the right to accept such Game
as changed in the manner provided in Section 2.3 above.
2.5 GTIS acknowledges that the Atari Group manufactures and sells Games for
many different entertainment platforms, including coin-operated games and home
games of all types, and that any Games in respect of which GTIS obtains rights
hereunder for exploitation on a specific Designated Consumer Game Platform may
be developed by the Atari
15
<PAGE> 16
Group for other entertainment platforms, including other Designated Consumer
Game Platforms, or for territories not included in the Licensed Territory and
GTIS will have no rights therein.
2.6 The Atari Group agrees to use commercial efforts, in its reasonable
judgment, to acquire rights to exploit Games on Designated Consumer Game
Platforms throughout the Licensed Territory when it acquires rights to exploit
such Games in the United States. Except to the extent that the Atari Group has
heretofore granted rights (or any option, right of first refusal or
negotiations or other ability to obtain rights which may be subsequently
exercised) to manufacture, distribute or sell home video games on Designated
Consumer Game Platforms within the Licensed Territory to any third party
(including any renewals or extensions thereof resulting from the exercise of
previously granted rights), if the Atari Group develops internally any
coin-operated or home video game, then the Atari Group shall not license the
right to use its computer software source code or object code for such
coin-operated or home video game to any third party for the purpose of
developing and/or marketing a Game for play on a Designated Consumer Game
Platform in the Licensed Territory, unless the Atari Group shall have first
offered to license such Game to GTIS as provided in this Agreement. With
respect to Games in which the Atari Group acquires or intends to acquire from a
third party rights to exploit such Games on Designated Consumer Game Platforms
in the United States, but with respect to which the Atari Group is unable or
unwilling to acquire rights to exploit such Games on Designated Consumer Game
Platforms in the Licensed Territory based on the Atari Group's reasonable
judgment that such rights are not available on commercially acceptable terms,
or on terms which, in the Atari Group's judgment, would make it uneconomical
for the Atari Group to acquire and license such rights to GTIS on the terms and
conditions set forth herein and in
16
<PAGE> 17
the Atari Home Video Game Distribution and License Agreement, the Atari Group
shall so advise GTIS and GTIS shall have the reasonable opportunity to consult
with the Atari Group (and, in GTIS' discretion, to propose other licensing or
cost sharing arrangements with respect to such Game) prior to the Atari Group's
determination whether to accept or decline to accept such rights which shall be
made in good faith.
2.7 GTIS or its sublicensees shall actively commence marketing and selling an
Accepted Game in reasonable commercial quantities in all Marketing Areas within
the Licensed Territory within six (6) months following the date upon which the
Atari Group shall have First Released such Accepted Game in the United States
(the "Delivery Date"), provided however, that such six (6) month period shall
be extended for a period of sixty (60) days in Marketing Areas, other than
those designated as "Key Marketing Areas" on Schedule C annexed to the Atari
Home Video Game Distribution and License Agreement, if GTIS shall have proposed
a sublicensee to distribute Licensed Products in such Marketing Area and the
Atari Group shall have withheld its approval of the sublicensee. If GTIS or
its sublicensees shall have failed to commence actively marketing and selling
an Accepted Game in any Marketing Area within the Licensed Territory within six
(6) months following the Delivery Date with respect thereto, then the Atari
Group shall have the right, in addition to any other rights which the Atari
Group may have hereunder or under any Atari Home Video Game Distribution and
License Agreement, upon thirty (30) days written notice to GTIS, to suspend and
revoke GTIS' or its sublicensees' right to sell such Accepted Game in such
Marketing Area or to declare such right henceforth to be non-exclusive, as the
Atari Group shall determine. If GTIS or its sublicensees shall have failed to
commence actively marketing and selling three (3) or more Accepted Games
17
<PAGE> 18
which have been designed for play on the same Designated Consumer Game
Platform, in each case within six (6) months following the Delivery Date with
respect thereto, in any Marketing Area within the Licensed Territory, then the
Atari Group shall have the right, upon thirty (30) days written notice to GTIS,
permanently to suspend and revoke GTIS' right to distribute and sell all future
Accepted Games which have been designed for play on the same Designated
Consumer Game Platform in such Marketing Area and to exclude such Marketing
Area from the Licensed Territory under all future Atari Home Video Game
Distribution and License Agreements for Games which have been designed for play
on such Designated Consumer Game Platforms. Notwithstanding the foregoing,
however, GTIS or its sublicensees shall not be required to have actively
commenced marketing and selling an Accepted Game in any Marketing Area if the
specific Designated Consumer Game Platform on which such Accepted Game has been
designed for play shall not regularly be sold at retail or otherwise not be
generally available to consumers in such Marketing Area or if such Accepted
Game is banned in the entire Marketing Area.
For purposes of documenting compliance with this Section 2.7, GTIS shall
submit a report, as of the date six (6) months following the Delivery Date,
listing the Marketing Areas in which GTIS has not commenced actively marketing
and selling an Accepted Game. Such report shall be sent to the Atari Group
within forty-five (45) days after the end of said six (6) month period, and
shall indicate the status for each Marketing Area listed (indicating the date
of expected First Release and whether a sublicensee has been appointed). Such
summary report shall be made in good faith, using the best available
information as of the date the report is submitted.
18
<PAGE> 19
2.8 Royalties payable to AGC pursuant to Schedule B of the Atari Home Video
Game Distribution and License Agreement are measured by the wholesale prices of
Licensed Product. Accordingly, reasonably in advance of AGC's decision to
enter into a developer contract and reasonably in advance of GTIS' initial
release of the Licensed Product, GTIS shall advise AGC, at AGC's request, of
GTIS' expected pricing strategy and the reasons therefor. Nothing herein shall
be deemed to restrict GTIS' freedom in selecting wholesale sales prices it
considers appropriate, which shall be in GTIS' sole discretion.
2.9 Anything in this Agreement to the contrary notwithstanding, with respect
to any Games currently under development by the Atari Group for which the Atari
Group has heretofore made development advances and as to which the Atari Group
has the right to grant licenses to GTIS to manufacture, distribute and sell
versions of the Game for use on one or more Designated Consumer Game Platforms,
if GTIS does not exercise its first option within the time periods or in the
manner set forth in Section 2.3 of this Agreement, GTIS shall not have any
subsequent rights with respect to such Game, including rights under Section
2.4, even if the Atari Group makes material changes in programming of the Game
or in the amount of any Third Parties Fees and Royalties.
2.10 If, under Section 2.1 of any Atari Home Video Game Distribution and
License Agreement entered into under this Agreement, Licensor has granted
written approval (which shall not be unreasonably withheld) to Licensee of a
sublicensee for the Licensed Property, such approval shall apply to the
sublicensing by that sublicensee of all Licensed Properties licensed to
Licensee under Atari Home Video Game Distribution and License Agreements
entered into under this Agreement, subject to the following: (i) the
19
<PAGE> 20
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
sublicense agreements shall contain provisions with respect to quality of
Licensed Product, trademarks, copyrights, materials, other intellectual property
rights, rights of additional sublicensing or assignment, termination rights,
confidentiality, accounting, auditing, reporting and payment procedures in form
agreed to by GTIS and WMS, and the form as so agreed to may be used by all
approved sublicensees described in clause (iii) below; provided that if such
form is not so used, any other form to be used shall be subject to prior
approval as provided in this subsection (i); (ii) no such blanket approval
shall be deemed given with respect to Licensed Properties as to which approval
requirements imposed by third parties, such as the NFL and NBA, apply, (iii) if
the sublicense is for a Marketing Area other than those designated as Key
Marketing Areas in such Atari Home Video Game Distribution and License Agreement
and if the expected sales volume in such Marketing Area, in GTIS' good faith
judgment, is an average of * units or less per SKU per year, Licensee will not
be required to obtain Licensor's prior written approval of the terms of such
license but Licensee will be required to provide a copy of each sublicense to
Licensor within ten (10) Business Days after GTIS enters into such sublicense;
and (iv) if the Marketing Area is designated as a Key Marketing Area or if, in
GTIS' good faith judgment, the expected sales volume for such Marketing Area is
more than an average of * units per SKU per year, Licensee will be required to
obtain Licensor's prior written approval, which Licensor will not unreasonably
withhold, of the terms of a sublicense for such Marketing Area even if the
identity of the sublicensee has been previously approved; provided, however, if
a sublicense is for multiple platforms and multiple games, the approval of the
sublicense will be deemed to be approval for all Games distributed under that
sublicense (subject
20
<PAGE> 21
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to clause (ii)). Anything to the contrary notwithstanding, (x) if a previously
approved sublicensee becomes an Exporter (as such term is defined in Exhibit A
to the Atari Home Video Game Distribution Agreement) or a Pirate, Licensee will
immediately upon becoming aware thereof notify Licensor of the identity of such
Exporter or Pirate and as soon as practicable terminate the sublicense upon
request by Licensor, and (y) Licensor and Licensee will review every two years
the identity of sublicensees, and those sublicensees who previously received
blanket approval as provided in the first sentence of this Section and who are
no longer considered acceptable by Licensor, in the exercise of Licensors'
reasonable judgment, will no longer have such blanket approval and will be
subject to Licensor's prior approval with respect to all future sublicenses in
accordance with the approval procedures set forth above. Licensee shall use
all reasonable efforts to cause each agreement with its sublicensees to permit
Licensee to terminate such agreement immediately if such sublicensee shall be
or become an Exporter or a Pirate.
3. MINIMUM GUARANTEED ADVANCE ROYALTY. In consideration for both the option
granted herein and in the Master Atari PC Agreement and as a guaranteed advance
royalty, GTIS is paying to WMS the aggregate sum of * Dollars ("Minimum
Guaranteed Advance Royalty") in the manner provided in the Master Atari PC
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF WMS. WMS represents and warrants that
this Agreement has been duly authorized, executed and delivered by WMS; WMS has
the full power and authority to enter into this Agreement and to perform its
obligations hereunder and this Agreement constitutes the valid and binding
obligation of WMS, enforceable
21
<PAGE> 22
in accordance with its terms, and the making of this Agreement by WMS does not
violate or conflict with any agreement, right or obligation existing between
WMS and any other person, firm or corporation.
5. REPRESENTATIONS AND WARRANTIES OF GTIS. GTIS represents and warrants that
this Agreement has been duly authorized, executed and delivered by GTIS; GTIS
has the full power and authority to enter into this Agreement and to perform
its obligations hereunder and this Agreement constitutes the valid and binding
obligation of GTIS enforceable in accordance with its terms; and the making of
this Agreement by GTIS does not violate or conflict with any agreement, right
or obligation existing between GTIS and any other person, firm or corporation.
6. CONFIDENTIAL INFORMATION. GTIS shall keep in confidence and not disclose
or make available to any third party, without the written permission of AGC ,
the terms of this Agreement and the proprietary information of the Atari Group
made known to it under this Agreement, including without limitation any
information with respect to Proposed Games prior to the date on which they are
First Released and any Master Disk or version thereof. Likewise, WMS and the
Atari Group shall keep in confidence and not disclose to any third party,
without the written permission of GTIS, the terms of this Agreement and the
proprietary information of GTIS made known to it under this Agreement. This
requirement of confidentiality shall not apply to information that is (a)
permitted to be disclosed under an Atari Home Video Game Distribution and
License Agreement; (b) in the public domain through no wrongful act of the
receiving party; (c) rightfully received by the receiving party from a third
party who is not bound by a restriction of nondisclosure; (d) already in the
receiving party's possession without
22
<PAGE> 23
restriction as to disclosure; or (e) is required to be disclosed by applicable
rules and regulations of government agencies or judicial bodies. WMS or GTIS
shall not issue any press release or other public or trade announcement with
respect to the transactions contemplated by this Agreement unless the issuing
party shall have first consulted with the other with respect thereto and
obtained the other's prior written approval therefor, which approval will not
be unreasonably withheld or delayed. The obligations of confidentiality under
this Section 6 shall survive termination of this Agreement and either party
shall be entitled to seek injunctive or equitable relief to prevent the breach
or threatened breach by the other of the provisions of this Section and to
secure its enforcement. With respect to this Agreement and all Atari Home
Computer Software Distribution and License Agreements entered into in
connection therewith, each of the AGC Group and GTIS agree to use reasonable
efforts to ensure that either of them may disclose the proprietary information
of the other (including, without limitation, the software source code and tools
relating to any Game) only to those persons within their organizations who have
a need to know such information in order to perform its obligations under this
Agreement and the Home Video Game Distribution and License Agreements and any
such disclosure shall be limited to the information which needs to be known.
Further, neither the AGC Group nor GTIS shall use any such proprietary
information for purposes other than the performance of its obligations under
this Agreement and the Home Video Game Distribution and License Agreements.
7. NOTICES. Any notice, consent, approval, request, waiver or statement
to be given, made or provided for under this Agreement shall be in writing and
deemed to have been duly given (a) by its delivery personally or by express
mail; or (b) five (5) days after its
23
<PAGE> 24
being mailed, air express, registered or certified, return receipt requested,
in a U.S. Post office addressed as follows:
To GTIS:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz, President
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
To WMS:
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
24
<PAGE> 25
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
With a copy to:
Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
or such other address as either party may designate by notice given as
aforesaid.
8. DEFAULT. In the event that GTIS shall default in any of its material
obligations hereunder or under any Atari Home Video Game Distribution and
License Agreement and the Atari Group or WMS has provided notice of such
default in accordance with the provisions of Section hereof, if GTIS has not
cured such default within fifteen (15) days of such notice, or within the grace
periods provided in the Atari Home Video Game Distribution and License
Agreement in respect of payments thereunder, then, in addition to all other
rights and remedies of the Atari Group or WMS at law or in equity, at the
option of the Atari Group or WMS, all rights granted to GTIS under Section 2 of
this Agreement shall be deemed terminated and shall revert to the Atari Group,
provided it is understood that notwithstanding such termination, the Atari Home
Video Game Distribution and License Agreements with respect to Accepted Games
which were deemed entered into prior to such termination, and which are not in
default, shall remain in full force and effect. No such termination shall in
any way affect
25
<PAGE> 26
or diminish WMS' rights hereunder, including the right of WMS to receive the
Minimum Guaranteed Advance Royalty. Anything herein to the contrary
notwithstanding, the rights granted to GTIS under Section 2 of this Agreement
shall not be affected by an alleged default by Licensee under an Atari Home
Video Game Distribution and License Agreement resulting from a bona fide
dispute between Licensor and Licensee provided that Licensee pays all
undisputed amounts to Licensor and all disputed amounts are paid into a bona
fide third party escrow account.
9. OTHER TERMINATION. Anything in this Agreement to the contrary
notwithstanding, if pursuant to Section 10 of the GTIS Master Home Video
Agreement, WMS elects to terminate all rights granted to GTIS under Section 2
of the GTIS Master Home Video Agreement (a "Notice of Election"), WMS must also
terminate all rights granted to GTIS under Section 2 of this Agreement;
provided that, notwithstanding such termination, all Atari Home Video Game
Distribution and License Agreements with respect to Accepted Games which were
deemed entered into prior to such termination, and which are not in default,
shall remain in full force and effect. Within thirty (30) days following the
date on which WMS shall issue a Notice of Election, WMS shall pay to GTIS an
amount equal to any then unrecouped portion of the Minimum Guaranteed Advance
Royalty which has theretofore been paid to WMS under this Agreement and the
Master Atari PC Agreement, together with interest thereon at the prime rate
designated by Citibank, N.A. calculated from the date paid. No termination by
WMS of GTIS' rights to continue to acquire licenses with respect to Games
pursuant to the provisions hereof shall in any way affect or diminish any
rights of WMS or the Atari Group hereunder, or the Atari Group's right to
continue to receive Royalties under any Atari Home Video Game
26
<PAGE> 27
Distribution and License Agreement which remains in effect, except that GTIS
shall not be entitled to any further recoupment of the Minimum Guaranteed
Advance Royalty.
10. NON-SOLICITATION.
During the Option Period and for a further period of two (2) years
thereafter, neither GTIS nor the Atari Group shall, for itself or on behalf of
any other person, partnership, corporation or entity, directly or indirectly,
or by action in concert with others (a) solicit, induce, or encourage any
person to terminate his or her employment or other contractual relationship
with the other party or any of its affiliates, or (b) solicit, induce, or
encourage any designer, developer, salesperson or other person known to have a
contractual relationship with the other party to discontinue, terminate, cancel
or refrain from entering into any design, development, sales or other
contractual relationship with the other party or any of its affiliates. Each
party agrees that the parties hereto shall be entitled to injunctive or other
equitable relief to prevent the breach or threatened breach by it of the
provisions of this section and to secure its enforcement.
11. STOCK PURCHASE AGREEMENT CONDITIONS. This Agreement shall become
effective on the Effective Date and shall be null and void and of no force and
effect if the Effective Date shall not have occurred by June 30, 1996. On the
Effective Date, WMS shall cause AGC to execute an instrument of assumption,
whereby AGC shall assume all of the obligations of AGC and the Atari Group
referred to in this Agreement. Notwithstanding such assumption by AGC, WMS
shall remain liable for the obligations of AGC under this Agreement so long as
an Early Termination Event shall not have occurred.
27
<PAGE> 28
12. MISCELLANEOUS.
12.1 This Agreement is personal to GTIS as one party and WMS as the other
party. Neither this Agreement nor any party's rights under it may be assigned,
in whole or in part, nor may its obligations be delegated, in whole or in part,
to any person or party without the prior written consent of the other party,
except that any party may assign its rights and delegate obligations to any of
its direct or indirect wholly-owned subsidiaries or affiliates or to any
person, firm or corporation owning or acquiring all or substantially all of the
stock or assets of that party, as long as both the assignee and the assignor
remain fully liable for assignor's obligations hereunder. After the Effective
Date, in connection with any Early Termination Event, WMS and AGC shall obtain
the assumption by the purchaser or transferee of all covenants, obligations and
duties undertaken by the seller pursuant to the terms of this Agreement,
including its obligations with respect to Games and the intellectual property
from which they are derived. This Agreement shall bind the parties, their
successors and permitted assignees and delegees. WMS, as one party, and GTIS,
as the other party, are each jointly and severally liable for their respective
obligations under the terms of this Agreement.
12.2 The entire understanding between the parties hereto relating to the
subject matter hereof is contained herein. This Agreement cannot be changed,
modified, amended or terminated except by an instrument in writing executed by
the parties hereto.
12.3 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
28
<PAGE> 29
to therein and no waiver shall be deemed or construed to be a waiver of such
terms or conditions for the future or any subsequent breach thereof.
12.4 This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between WMS and GTIS, and neither
WMS nor GTIS 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.
12.5 This Agreement shall be governed by the laws of the State of Illinois
applicable to contracts made and to be wholly performed in the State of
Illinois.
12.6 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, either such provision will be deemed amended to conform to such
laws or regulations without materially altering the intention of the parties,
or it shall be stricken and the remainder of this Agreement shall remain in
full force and effect.
12.7 This Agreement may be executed in counterparts each of which shall be
deemed an original and when taken together shall be deemed one and the same
document.
12.8 In the event of conflicts between the provisions of this Agreement and the
Atari Home Video Game Distribution and License Agreement, the provisions of
this Agreement shall prevail.
29
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
WMS INDUSTRIES INC.
By: /s/ Neil D. Nicastro
-----------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
-----------------------------
30
<PAGE> 31
EXHIBIT A
HOME VIDEO GAME
DISTRIBUTION AND LICENSE AGREEMENT FOR ATARI GAMES
AGREEMENT made this ___ day of __________, 199__, by and between GT
INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices at 16 East
40th Street, New York, New York 10016 (herein called "Licensee") and ATARI
GAMES CORPORATION, a California corporation with offices at [ ]
(herein called "Licensor").
W I T N E S S E T H:
WHEREAS, Licensor owns or controls the right to
manufacture, sell and distribute Home Video Games (as hereinafter defined)
containing the Licensed Property (as hereinafter defined) in the Licensed
Territory (as hereinafter defined); and
WHEREAS, WMS industries Inc., the parent of Licensor, and Licensee are
parties to the Master Atari Home Video Agreement (as hereinafter defined)
pursuant to which Licensee has exercised its right and option to acquire a
license to manufacture, distribute and sell Home Video Games embodying the
Licensed Property in the Licensed Territory;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Alternative Royalty" shall have the meaning ascribed in Schedule "B"
annexed hereto.
1.2 "Cartridge-Based Product" shall have the meaning ascribed in Schedule "B"
annexed hereto.
1.3 "Cartridge Margin" shall have the meaning ascribed in Schedule "B" annexed
hereto.
1.4 "Computer Software" or "Software" shall mean computer software in the form
of a cartridge, CD-ROM disk or other device containing substantially full and
<PAGE> 32
complete computer game code, including the source code, the assembly code, the
object code and such data files and other files as are necessary for the
Licensed Product to achieve its functional purpose, whereby data and visual
images, with or without sound, can be manipulated, communicated, reproduced or
perceived with the aid of a Designated Consumer Game Platform.
1.5 "Delivery Date" shall have the meaning ascribed in Section 1.7 of the
Master Atari Home Video Agreement.
1.6 "Designated Consumer Game Platform" shall have the meaning ascribed in
Section 1.8 of the Master Atari Home Video Agreement.
1.7 "Exporter" shall have the meaning ascribed in Section 3.3 hereof.
1.8 "First Foreign Sale" shall have the meaning ascribed in Schedule "B"
annexed hereto.
1.9 "First Release" or "First Released" shall have the meaning ascribed in
Section 1.11 of the Master Atari Home Video Agreement.
1.10 "Front-line" shall have the meaning ascribed in Schedule "B" annexed
hereto.
1.11 "Full Price" shall have the meaning ascribed in Section 1.12 of the Master
Atari Home Video Agreement.
1.12 "Game" shall have the meaning ascribed in Section 1.13 of the Master Atari
Home Video Agreement.
1.13 "Home Video Game" shall mean Computer Software designed to operate solely
on a specific Designated Consumer Game Platform.
1.14 "Late Charge" shall have the meaning ascribed in Section 6.5 hereof.
1.15 "Late Report" shall have the meaning ascribed in Section 6.5 hereof.
1.16 "Licensed Products" shall mean Home Video Games embodying the Licensed
Property.
2
<PAGE> 33
1.17 "Licensed Property" shall mean the intellectual property, game concepts,
descriptions, characteristics and method of play described in the New Game
Option Notice and/or on Schedule A and embodied in the "Licensed Products."
1.18 "Licensed Territory" shall have the meaning ascribed in Section 3.1 hereof.
1.19 "Marketing Area" shall have the meaning ascribed in Section 3.4 hereof.
1.20 "Master Atari Home Video Agreement" shall mean the Master Option and
License Agreement for Atari Home Video Games dated March 27, 1996, between
Licensee and WMS Industries Inc.
1.21 "Master Disk" shall have the meaning ascribed in Section 1.21 of the
Master Atari Home Video Agreement.
1.22 "Minimum Guaranteed Advance Royalty" shall have the meaning ascribed in
Section 3 of the Master Atari Home Video Agreement.
1.23 "Net Wholesale Sales Price" shall have the meaning ascribed in Schedule
"B" annexed hereto.
1.24 "New Game Option Notice" shall have the meaning ascribed in Section 2.3 of
the Master Atari Home Video Agreement.
1.25 "Option Period" shall have the meaning ascribed in Section 1.28 of the
Master Atari Home Video Agreement.
1.26 "Other Atari Home Video Game Distribution and License Agreements" shall
have the meaning ascribed in Schedule "B" annexed hereto.
1.27 "Recoupable Amount" shall have the meaning ascribed in Schedule "B"
annexed hereto.
1.28 "Renewal Option Period" shall have the meaning ascribed in Section 2.1 of
the Master Atari Home Video Agreement.
3
<PAGE> 34
1.29 "Renewal Option Year" shall have the meaning ascribed in Section 2.1 of
the Master Atari Home Video Agreement.
1.30 "Royalty" shall have the meaning ascribed in Schedule "B" annexed hereto.
1.31 "Royalty Period" shall have the meaning ascribed in Section 6.1 hereof.
1.32 "Term of this Agreement" or "period of this Agreement" or "term hereof" or
"so long as this Agreement remains in force" or words of similar connotation
shall include the initial period of this Agreement and the period of all
renewals, extensions, substitutions or replacements of this Agreement.
1.33 "Third Party Fees and Royalties" shall mean all fees, royalties and other
participations of any kind or nature payable by Licensor to any third party,
including developers, licensors and others having rights in connection with the
exploitation of the Licensed Products. There shall be excluded from the term
"Third Party Fees and Royalties" as used herein a) any fees or royalties payable
to employees or consultants by Licensor or its affiliates with respect to the
development of the Licensed Product in house; and b) advances paid to any third
party having rights in connection with the exploitation of the Licensed
Products (other than persons referred to in clause (a)), provided, however,
that if such advances are recoupable by Licensor or its affiliates from future
royalties payable to such third party, then Third Party Fees and Royalties
shall include such royalties which would otherwise be payable to such third
party were it not for such right of recoupment.
1.34 "Weighted Average Gross Profits" shall have the meaning ascribed in
Schedule "B" annexed hereto.
Capitalized terms used, but not defined herein, shall have the meaning
ascribed to such terms in the Master Atari Home Video Agreement.
4
<PAGE> 35
2. GRANT OF LICENSE.
2.1 Licensor hereby grants and Licensee hereby accepts, for the term of this
Agreement and subject to the terms hereinafter set forth, the exclusive license
to manufacture, distribute, subdistribute and sell the Licensed Products in the
Licensed Territory. Licensee shall have the right to sublicense any of the
rights granted to Licensee hereunder to affiliates of GTIS, as such term is
defined in Section 1.15 of the Master Atari Home Video Agreement, and, with
Licensor's prior written consent, which consent shall not be unreasonably
withheld or delayed, to unaffiliated third parties. Without limiting the
generality of the foregoing, Licensor shall not unreasonably withhold or delay
its consent to proposals by Licensee to sublicense its rights hereunder to third
party dedicated home video game hardware platform manufacturers for the purpose
of "bundling" the Licensed Products together with such hardware products for
distribution only within the Licensed Territory. Licensee shall not have the
right to sublicense its rights hereunder (and Licensor may withhold its consent
to any proposed sublicense) to any third party for the purpose of distributing,
or to any third party who Licensee knows or could reasonably expect intends to
sell or distribute, the Licensed Products outside of the Licensed Territory.
Licensor may also withhold its consent to any proposed sublicense arrangement,
if as a result thereof, it can be reasonably anticipated that Royalties which
may become payable to Licensor on account of sales of Licensed Products in the
Marketing Areas designated as "Key Marketing Areas" on Schedule C will be less
than if such Licensed Products were sold directly by Licensee. It is understood
that the term "Licensed Products" does not include Computer Software designed
for play on a) the Atari Jaguar(R) system, the 3D-O(R) system, and their
respective successors (including any enhancements, improvements or updates),
except only to the extent that Licensor or any of its affiliates shall itself
(and not through any licensee or sublicensee) actually release the Licensed
Products for commercial sale in the ordinary course of business on such hardware
platforms in the United States; b) any multipurpose home or personal computer
systems; or c) any other medium of exploitation, including handheld games,
Computer Software playable on dedicated home video game hardware
5
<PAGE> 36
having a microprocessor of less than 32 bit capacity (excluding SNES and Sega
Genesis), over the air, cable or fiber optic transmission, other than
Designated Consumer Game Platforms; all of which remain the sole property of
Licensor. No license is granted hereunder for the manufacture, sale or
distribution of Licensed Products to be used as premiums, in combination sales,
as giveaways or to be disposed of under similar methods of merchandising,
except only that Licensee shall have the right, subject to rights of third
parties in the Licensed Property, to distribute Licensed Products as premiums,
combination sales or giveaways solely (i) subject to Licensor's consent, which
shall not unreasonably be withheld or delayed, in connection with the sale and
distribution of other Home Video Games licensed to Licensee by Licensor or its
affiliates under Other Atari Home Video Game Distribution and License
Agreements, and (ii) with respect to free or promotional goods in the
quantities set forth on Schedule "B" annexed hereto.
2.2 This license does not include any rights to subsequent versions of the
Licensed Property (so-called "sequels" or "derivatives"), such rights being
retained by Licensor, except as the same are otherwise required to be offered
to Licensee under the Master Atari Home Video Agreement.
3. LICENSED TERRITORY.
3.1 Licensee shall be entitled to manufacture, distribute and sell the
Licensed Products in all countries throughout the world, except (a) the United
States of America, its territories, possessions and United States military
installations worldwide; Canada; Mexico; and Japan; and (b) countries or
locations which are excluded under the terms of any license agreement between
Licensor and any third party having rights to the Licensed Property. The
territory in which Licensee shall be entitled to manufacture, sell and
distribute the Licensed Products as specified above is herein referred to as
the "Licensed Territory."
[If this is a game license for T-Mek for Sony PSX; Primal Rage for Sega
Saturn; or Return Fire for Sony PSX or Sega Saturn, then Licensee shall have
rights to a share of the profits from the distribution of these games in Market
Areas excluded under (b) above,
6
<PAGE> 37
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
but for which Licensor will receive income under distribution agreements
existing as of the Effective Date. For these agreements, Licensor shall pay to
Licensee an amount equal to * of the proceeds received by Licensor from such
sublicensee after deducting (a) an amount equal to all Third Party Fees and
Royalties, (b) an amount equal to the payment required to Warner Communications
Inc. as a result of this income, and (c) in the case of sublicensees to whom
Licensor supplies the Licensed Product, Licensor's direct manufacturing and
shipping costs. The remaining income shall remain with Licensor and not be
paid to Licensee as Recoupable Amounts.]
3.2 After the end of the Japan Territory Period, as defined in the letter
between WMS Industries Inc. and Licensee dated March 27, 1996 captioned, "Japan
Territory," Licensor shall have the exclusive right to license any of its
rights in Japan to third parties, subject to Licensee's prior written consent,
which consent shall not be unreasonably withheld or delayed. With respect to
the exploitation by Licensor of the Licensed Property in Japan, Licensee shall
be entitled to share in * of the net profits (as calculated in Section 2.1 of
Exhibit A attached to the Master Option and License Agreement for Atari PC
Games dated March 27, 1996) derived by Licensor from its sale of Licensed
Products in Japan. Licensor shall account and pay over to Licensee, not less
frequently than quarterly, Licensee's share of net profits from the sale by
Licensor of Licensed Products in Japan.
3.3 Licensor shall have the exclusive right to license to third parties or
otherwise exploit for its own account any of its rights with respect to the
Licensed Property outside of the Licensed Territory (and in any portion of the
Licensed Territory in which Licensee's right to distribute Licensed Products
have been revoked, suspended, or declared non-exclusive in accordance with
Section 3.4 below), and Licensee shall not manufacture, distribute or sell any
Licensed Products or otherwise exploit the Licensed Property directly or
indirectly in any area other than the Licensed Territory. Without limiting the
generality of the foregoing,
7
<PAGE> 38
Licensee shall not at any time sublicense, distribute or sell any Licensed
Products to any distributor or customer who Licensee knows or could reasonably
expect, based on objective evidence, intends to resell or export the Licensed
Products outside of the Licensed Territory. Licensor shall similarly not at
any time license, distribute or sell any Licensed Products to any licensee,
distributor or customer who Licensor knows or could reasonably expect, based on
objective evidence, intends to resell or export the Licensed Products within
the Licensed Territory. A licensee, sublicensee, distributor or customer who
wrongfully resells or exports Licensed Products from the Licensed Territory to
North America or Japan, or from North America or Japan to the Licensed
Territory, is referred to as an "Exporter." Licensor and Licensee shall have
the right, in addition to any other rights which they may have hereunder, to
require the other to terminate any license, distribution agreement or
arrangement with any such Exporter who is wrongfully distributing Licensed
Products in violation of the rights of the other party. Licensor shall also
have the right to delay for a period up to three (3) months the introduction of
any new Licensed Products into any country in which such Exporter may be
located or is operating.
3.4 Licensee shall actively commence marketing and selling the Licensed
Products within the Licensed Territory in reasonable commercial quantities
within six (6) months following the Delivery Date, provided however, that such
six (6) month period shall be extended for a period of sixty (60) days in
Marketing Areas, other than those designated as "Key Marketing Areas" on
Schedule C annexed hereto if a) Licensee shall have proposed a sublicensee to
distribute Licensed Products in such Marketing Area and the Licensor shall have
withheld its approval of the sublicensee or b) if Licensee shall have exercised
its right, pursuant to Section 3.3 above, to delay the introduction of new
Licensed Products into any country within the Marketing Area by reason of the
location or operation of an Exporter in such Marketing Area. If Licensee shall
fail to have commenced actively marketing and selling the Licensed
8
<PAGE> 39
Products in any country or in any related group of countries as described on
Schedule "C" annexed hereto, (a "Marketing Area") within the Licensed Territory
within six (6) months following the Delivery Date with respect thereto, then
the Licensor shall have the right, in addition to any other rights which
Licensor may have hereunder, upon thirty (30) days prior written notice to
Licensee, to suspend or revoke Licensee's right to sell the Licensed Products
in such Marketing Area or to declare such right henceforth to be nonexclusive,
as Licensor shall determine. Notwithstanding the foregoing, however, Licensee
shall not be required to have actively commenced marketing and selling a
Licensed Product in any Marketing Area if the specific Designated Consumer Game
Platform on which such Licensed Product has been designed for play shall not
regularly be sold at retail or otherwise not be generally available to
consumers in such Marketing Area or if the Licensed Product is banned in the
entire Marketing Area.
3.5 For purposes of documenting compliance with Section 3.4 above, Licensee
shall submit a report, as of the date six (6) months following the Delivery
Date, listing the Marketing Areas in which Licensee has not commenced actively
marketing and selling an Accepted Game. Such report shall be sent to Licensor
within forty-five (45) days after the end of said six (6) month period, and
shall indicate the status for each Marketing Area listed (indicating the date
that marketing and selling is expected to begin and whether a sublicensee has
been appointed or will be replaced). Such summary report shall be made in good
faith, using the best available information as of the date the report is
submitted.
4. TERM.
The license granted hereunder shall be effective on the date hereof and
shall terminate on the earlier of a) five (5) years from the date hereof, or
b) upon termination of Licensor's rights obtained from third parties, unless
sooner terminated in accordance with the terms and conditions hereof; provided,
however, that subject to the earlier termination of Licensor's rights obtained
from third parties, the license term shall be deemed extended for up to two (2)
additional one (1) year renewal terms, if during the immediately preceding
year, sales
9
<PAGE> 40
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
of Licensed Products in the Licensed Territory shall have amounted to at least
* units. If Licensee's sales of Licensed Products in the Licensed Territory
during the first of such additional one-year renewal term shall be less than *
units, Licensee may pay to Licensor an amount equal to * Dollars per unit
multiplied by the number of units less than * sold by Licensee during such year
to make up the shortfall and the license term shall then be extended for the
remaining renewal year.
5. CONSIDERATION.
Licensee shall pay Licensor, with respect to sales throughout the Licensed
Territory of the Licensed Products, a Royalty as specified in Schedule "B"
annexed hereto on each unit of Licensed Product sold.
6. ACCOUNTINGS.
6.1 Licensee agrees to forward to Licensor at Licensor's address set forth in
Section 17, within forty-five (45) days after the end of each calendar quarter
(a "Royalty Period"), commencing with the first calendar quarter during which
any unit of the Licensed Product is sold, a report of the number of units of
the Licensed Products sold within such Royalty Period and a calculation, in
reasonable detail and reported separately by Marketing Area, of the Royalty,
including any Alternative Royalty, due on account of the sale of such units in
accordance with Section 6.3 below and Schedule "B" annexed hereto, and any
recoupment of the Minimum Guaranteed Advance Royalty claimed in accordance with
Schedule "B" annexed hereto and Section 3 of the Master Atari Home Video
Agreement. Such report shall also include a cumulative reconciliation of the
number of units of Licensed Products produced by Licensee to the number of
units on hand. Licensee agrees that accompanying each such report shall be
payment, in United States funds, of the Royalties due to Licensor, if any, in
respect of such Royalty Period in excess of any permitted recoupment. Royalties
calculated in foreign currencies shall be converted to United States currency
at the spot rate of exchange published in the Wall
10
<PAGE> 41
Street Journal as of the last day of the Royalty Period. Such reports shall be
required to be submitted with respect to sales and distributions of the
Licensed Product whether or not any amounts are due under the terms hereof.
6.2 Licensee agrees to keep accurate books of account and records with respect
to the Licensed Products, covering all sales, purchases and inventories of
Licensed Products and all Royalties due under this Agreement, at Licensee's
offices (or the offices of Licensee's affiliates) and to permit (or procure the
right for) Licensor at its own expense to have accounting professionals (which
may include Licensor's employees who have accounting degrees) inspect such
books of account and records of Licensee or its sublicensees during reasonable
business hours (but not during the first three (3) weeks of a calendar
quarter), upon prior reasonable written notice, for the sole purpose of
verifying the reports to be provided hereunder. Such inspections, together with
inspections of Licensee's books of account and records pertaining to other Home
Video Games licensed to Licensee by Licensor or its affiliates under Other
Atari Home Video Game Distribution and License Agreements, shall occur no more
frequently than twice during any twelve (12) month period for each of the
Licensee's offices. Licensor's inspectors shall not be physically present in a
specific office of Licensee for more than ten (10) consecutive business days in
connection with any such inspection, provided that Licensee shall have supplied
all requested information and documentation and responded to questions on a
reasonably prompt basis. Licensee shall promptly furnish to Licensor copies of
any report which Licensee may produce as the result of any audit by Licensee of
the books of account and records of any sublicensee of Licensee. Licensor
shall keep any information obtained from any such inspections in confidence and
shall require that its accounting professionals do so as well. Licensee's
books relating to any particular Royalty statement may be examined as aforesaid
only within two (2) years after the date rendered and Licensee shall have no
obligation to permit Licensor to so examine such books relating to any
particular Royalty statement more than once for any one statement, unless in
connection with a civil action filed by Licensor against Licensee in connection
with such statement. In the event that any audit
11
<PAGE> 42
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
by Licensor's accounting professionals reveals that Licensee has underpaid
Licensor by an aggregate of * or more with respect to the specific Royalty
statements which are the subject of such audit, Licensee agrees that it shall
also reimburse Licensor for the reasonable documented costs for any such audit
(including traveling costs) up to the amount of the shortfall.
6.3 Royalties shall be paid on * of products sold by Licensee's point of sale
("POS") customers, less actual returns. With respect to shipments to non-POS
customers, not less than * of the shipment shall be deemed a sale for Royalty
purposes on the date of shipment. Not less than * of the balance of the
shipment, less actual returns, shall be deemed a sale for Royalty purposes six
(6) months following the date of shipment, and the balance of such shipment,
less actual returns not already counted, shall be deemed a sale for Royalty
purposes twelve (12) months following the date of shipment. As used herein,
POS customers mean those customers who report actual sales by selection number
to Licensee via computer and scan their sales by UPC codes at cash registers.
6.4 Licensor shall permit Licensee, at Licensee's own expense, to have an
independent certified public accountant inspect Licensor's books and records
with respect to the payment by Licensor of Third Party Fees and Royalties in
connection with the Licensed Products, during reasonable hours, upon prior
reasonable written notice and subject to such confidentiality requirements
(including the execution of appropriate confidentiality agreements) as Licensor
may require, for the sole purpose of verifying payment and calculation by
Licensor of such Third Party Fees and Royalties. Licensor's books and records
may be examined by Licensee's representatives not more frequently than twice in
any twelve-month period and Licensee and Licensor shall otherwise have
substantially the same rights as provided to the other under Section 6.2
above.
6.5 Licensee recognizes that the timely submission of all reports required to
be submitted to Licensor pursuant to Section 6.1 hereof is critical for
Licensor to
12
<PAGE> 43
maintain good relations with its third party licensors as well as for
Licensor's own financial reporting requirements. Therefore, in addition to any
other rights and remedies of Licensor, if Licensee shall be late by more than
five (5) business days with respect to any report and/or Royalty payment
required to be submitted to Licensor pursuant to Section 6.1 hereof (a "Late
Report"), then Licensee shall pay to Licensor a late charge ("Late Charge") at
a rate equal to the prime rate designated by Citibank N.A. on any Royalties
covered by such Late Report that are actually payable to Licensor as provided
in Schedule B. Such Late Charge shall be computed from the 46th day following
the last day of the calendar quarter for which such Late Report is due until
the date actually paid. Licensor may elect to waive payment of any such Late
Charge if Licensee shall have provided a reasonable estimate of Royalties due
within fifteen (15) days following the end of the calendar quarter covered by
such Late Report.
6.6 At the time that the Licensor shall provide to Licensee notice of
availability of a Game pursuant to Section 2.4 or 2.5 of the Master Atari Home
Video Agreement, Licensor shall provide to Licensee sufficient data to enable
Licensee to calculate Third Party Fees and Royalties payable with respect to
each Licensed Product (without regard to any advances which may have been made
by Licensor). If Licensee is unable to calculate specific Third Party Fees and
Royalties from the data provided, Licensee may request assistance from Licensor
with respect thereto, and Licensor shall use its best efforts to respond within
seven (7) days from the date of such request, but Licensee shall provide all
sales and other data in its possession which are necessary for such
calculations.
7. QUALITY OF LICENSED PRODUCT.
7.1 The Licensed Products as manufactured, advertised, sold, distributed or
otherwise disposed of by Licensee under this Agreement shall be of a high
quality and shall be sold and distributed in packaging prescribed by Licensor
bearing Licensor's trademarks and trade names. Such packaging may indicate that
the Licensed Products are distributed by Licensee. Licensor shall have the
right to determine in its reasonable discretion whether the Licensed Product
meets Licensor's high standards of merchantability. Licensee
13
<PAGE> 44
agrees to furnish Licensor fee of cost for Licensor's written approval as to
quality and style which approval shall not be unreasonably withheld), samples
of the Licensed Product, together with its proposed advertising, packaging and
wrapping materials, before its manufacture, sale or distribution (whichever
first occurs) and the Licensed Product shall not be sold or distributed by
Licensee without such written approval.
7.2 If Licensor shall disapprove of any item submitted by Licensee for
approval hereunder, Licensor shall furnish at the time notice of disapproval is
given to Licensee an explanation of the reason(s) for such disapproval and
recommendations for suggested changes and Licensee shall resubmit such item
after changes have been made for Licensor's approval.
7.3 In the event that the quality of any Licensed Product approved by Licensor
shall become less than that approved by Licensor and Licensee shall fail to
raise the quality to the approved level within thirty (30) days after received
written notice from Licensor, the license granted under this Agreement for such
Licensed Product shall automatically terminate and shall remain terminated
until Licensor shall subsequently renew its approval of the Licensed Product.
7.4 If disapproval is not given by Licensee within five (5) business days
after Licensor's receipt of the item submitted for approval, Licensor's
approval shall be deemed to have been given. Subsequent to final approval,
Licensor may request the Licensee once each quarter to send, without charge, a
reasonable number of production samples (but in any event not less than two (2)
copies of each language version) without payment of any Royalty hereunder to
Licensor to ensure quality control. Should Licensor require additional samples
for any reason other than resale or any other commercial exploitation by
Licensor, Licensee shall be required
14
<PAGE> 45
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to sell such samples to Licensor at its cost (but without payment of any
Royalties hereunder), but not more than * units of each Licensed Product.
8. ADVERTISING.
Licensee, at its own cost and expense, shall be solely responsible for all
advertising costs, including all in store and institutional advertising costs,
associated with the sale of Licensed Products in the Licensed Territory.
9. TRADEMARK AND COPYRIGHT, ETC.
9.1 "Notice" as used in this Section shall mean the following statutory
copyright notice and notice of registration or application for registration of
the licensed trademark:
_ _ _ _ (TM) or (R)
All Rights Reserved
C _ _ _ _ Licensed from [Atari(R) Games Corporation]
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensor shall advise Licensee prior to use
whether (TM) or (R) shall follow the words " _ _ _ _ ."
9.2 Licensee shall furnish to Licensor samples of all packaging in which the
Licensed Products are sold by Licensee and Licensor shall cause the copyright
in the packaging to be registered with the United States Copyright Office and
recorded with the United States Customs Department at Licensor's expense.
Licensee shall print, stamp or mold the Notice on all Licensed Products and on
the front of each package or container used in connection therewith, and
Licensee shall print the Notice on each label, advertisement and promotional
release concerning any Licensed Products, all in accordance with instructions
from Licensor, providing, however, that such notice shall be imprinted on the
back of the package or container
15
<PAGE> 46
used in connection therewith, displayed on the title screen of the Licensed
Product, and in the instruction booklet, if any, packaged with the Licensed
Product. Licensee agrees to execute and deliver to Licensor in such form as
Licensor may reasonably request all instruments necessary to effectuate
trademark protection or to record Licensee as a registered user of any
trademarks or to cancel such registration and if Licensee fails to execute such
instruments, Licensee hereby appoints Licensor Licensee's attorney-in-fact to
do so on Licensee's behalf. Licensee shall also furnish Licensor samples of
all advertising or promotional materials bearing the Notice for Licensor's
approval.
9.3 Subject to the terms of this Agreement, Licensee acknowledges and agrees
that: All copyrights, trademarks and service marks and rights to same referred
to in this Section in the name of and/or owned by Licensor shall be and remain
the sole and complete property of Licensor; that all such copyrights,
trademarks and service marks and rights to same in the name of or owned by any
copyright proprietor other than Licensor or Licensee shall be and remain the
sole and complete property of such copyright proprietor; that all trademarks
and service marks which, and/or the right to use which, arise out of the
license hereby granted to use the Licensed Property shall be and remain the
sole and complete property of Licensor; that Licensee shall not at any time
acquire or claim any right, title or interest of any nature whatsoever in any
such trademark or service mark by virtue of this Agreement or of Licensee's
uses thereof in connection with the Licensed Products; and that any right,
title or interest in or relating to any such trademark or service mark, which
comes into existence as a result of, or during the term of, the exercise by
Licensee of any right granted to it hereunder shall immediately vest in
Licensor.
9.4 Licensee agrees to assist Licensor at Licensor's expense to the extent
necessary in the procurement of any protection or to protect any of Licensor's
right to
16
<PAGE> 47
the Licensed Property. Licensee shall notify Licensor in writing of any
infringements or imitations by others of the Licensed Property on articles
similar to those covered in this Agreement which may come to the Licensee's
attention. Licensor shall have the right to commence action to enforce its
proprietary rights and prosecute any such infringements, and Licensee agrees to
fully cooperate, at Licensor's expense, in any such action. However, Licensee
shall not incur any such expense reimbursable by Licensor without Licensor's
express written approval and all recoveries resulting from any such action
shall belong solely to Licensor. In the event Licensor declines to pursue any
such action, Licensee may, with Licensor's written permission, and subject to
the consent of any third party having rights in the Licensed Property,
institute such an action, and Licensor, at Licensee's expense, shall cooperate
in such action instituted by Licensee and all recoveries resulting from any
such action shall belong solely to Licensee. Licensor shall not unreasonably
withhold or delay its permission to enable Licensee to pursue an action (if
Licensor shall decline to pursue such action) against persons or entities
reasonably believed by Licensee to be counterfeiting or pirating Licensee's
Licensed Products. Licensor shall not unreasonably withhold or delay its
permission to grant to any sublicensee who requires it, at the time of entering
into a sublicense, reasonable rights (without Licensor's prior consent in each
instance) to pursue persons reasonably believed to be engaged in counterfeiting
or piracy of the Licensee Product.
9.5 During the term of this Agreement and thereafter, Licensee:
a) will not challenge the ownership or rights of Licensor in and to the
Licensed Property or any copyright or trademark pertaining thereto developed by
or for Licensor, nor attack the validity of the license granted hereunder or
participate in any challenge thereto;
17
<PAGE> 48
b) will manufacture, sell and distribute the Licensed Products in compliance
with all applicable laws and governmental regulations in accordance with the
terms of this Agreement;
c) will not except as set forth in this Agreement, either directly or
indirectly, use or display or authorize others to use or display, the
trademarks, copyrights or proprietary rights of Licensor in connection with any
advertising, assembly, manufacture, distribution, use, sale or lease of any
goods, other than in connection with the manufacture and sale of the Licensed
Products; and
d) subject to Licensee's best business judgment Licensee will exercise
reasonable efforts to: manufacture sufficient quantities of the Licensed
Product to meet the market demand for same; conduct advertising activities to
promote the sale of Licensed Product; and make any and all arrangements
necessary to accomplish such undertakings.
10. MATERIALS.
10.1 Notwithstanding anything contained herein to the contrary and subject to
the terms of this Agreement, all artwork, designs and computer software
embodying the Licensed Property, or any reproduction thereof, or any packaging
or advertising materials, which are designed, developed and/or created by
Licensee hereunder (or any of its sublicensees, affiliates or subsidiaries),
shall be, and remain Licensor's sole and exclusive property, inclusive of all
copyrights and right to copyright therein and thereto for the life of the
copyright therein; provided that during the term of this Agreement, Licensee
shall have the exclusive right, license and privilege (without any compensation
to Licensor except as provided in Section 5) to use all such above described
materials in connection with its exploitation, sale and distribution of the
Licensed Products.
18
<PAGE> 49
10.2 Licensor shall make available to Licensee, at Licensor's actual out of
pocket cost, any artwork relating to the Licensed Property which Licensor owns
and which is reasonably available to Licensor for Licensee's use in connection
with the exploitation of the Licensed Property.
11. TRANSLATIONS.
In the event that Licensee shall reasonably require the text associated
with any Licensed Product to be translated into a language other than English,
Licensor shall, upon request, provide to Licensee the text files and the text
that appears in bit map files and printed copies of the script used for audio
components of CD-ROM and cartridge versions only of the Licensed Product and
Licensee shall produce, at its own expense, a translation text thereof and
audio track therefor. Licensor shall then cause a new Master Disk containing
such translation and audio track to be encoded and delivered to Licensee, at
Licensor's own expense with respect to the CD-ROM version only and at
Licensee's expense with respect to the cartridge version, provided, however,
that Licensee shall bear the cost of encoding new Master Disks containing
translations into languages other than French, German, Chinese, Portuguese,
Spanish and Italian. Licensee shall also bear the cost of inserting audio
tracks on Home Video Game cartridges.
12. REPRESENTATIONS AND WARRANTIES.
12.1 Licensor hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered by Licensor; Licensor has the full power and
authority to enter into this Agreement and perform its obligations hereunder;
this Agreement constitutes the valid and binding obligation of Licensor,
enforceable in accordance with its terms; the making of this Agreement does not
violate any agreement, right or obligation existing between Licensor and any
other person, firm or corporation; and the Licensed Property, if used
19
<PAGE> 50
pursuant to the license granted herein, will not infringe upon or violate any
rights of any third party.
12.2 Licensee hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered by Licensee; Licensee has the full power and
authority to enter into and perform its obligations hereunder; this Agreement
constitutes the valid and binding obligation of Licensee, enforceable in
accordance with its terms; the making of this Agreement does not violate any
agreement, right or obligation existing between Licensee and any other person,
firm or corporation; its manufacture, advertisement, distribution and sale of
the Licensed Products will be in accordance with the terms of this Agreement
and will not infringe upon or violate any rights of any third party. Licensee
shall have obtained all necessary licenses for the sale of the Licensed
Products within the Licensed Territory from Nintendo(R), Sega(R), Sony(R) or
any other manufacturer of Designated Consumer Game Platforms.
13. INDEMNIFICATION.
13.1 Each party agrees to indemnify and hold the other (including officers,
directors, agents and employees of such party or its subsidiaries, affiliates
and sublicensees) harmless against any loss, damage, expense or cost (including
reasonable attorneys' fees) arising out of any claim, demand or suit or
judgment resulting from any breach of any warranty or representation set forth
in Section 12 above. Each party shall promptly inform the other of any such
claim, demand, suit or judgment.
13.2 In connection with any such claim, demand or suit referred to above, the
party so indemnifying (the "Indemnitor") agrees to defend, contest or otherwise
protect the indemnified party (the "Indemnitee") against any such suit, action,
investigation, claim or proceeding at the Indemnitor's own cost and expense.
The Indemnitee shall have the
20
<PAGE> 51
right, but not the obligation to participate, at its own expense, in the
defense thereof by counsel of its own choice. In the event that the Indemnitor
fails timely to defend, contest or otherwise protect against any such suit,
action, investigation, claim or proceeding, the Indemnitee shall have the right
to defend, contest or otherwise protect against the same, and, upon ten (10)
days' written notice to the Indemnitor, make any compromise or settlement
thereof and recover the entire cost thereof from the Indemnitor, including
without limitation, reasonable attorneys' fees, disbursements and all
reasonable amount applied as a result of such suit, action, investigation,
claim or proceeding or compromise or settlement thereof. The obligations
hereunder shall survive the termination or expiration of this Agreement.
13.3 Neither Licensor nor Licensee shall be liable for any incidental,
consequential or punitive damages to the other.
14. EVENTS OF DEFAULT AND TERMINATION.
Licensee shall be deemed to be in default of this Agreement in the event
either of the following occurs:
a) Licensee fails to make any payment or furnish any statement in accordance
herewith, provided that Licensee shall have been given a first written notice
of such default and a period of at least fifteen (15) days in which to cure
such default and, if such default shall not have been cured within such period,
Licensee shall have been given a second written notice of such default and a
further period of at least ten (10) days in which to cure such default; or
b) Licensee fails after thirty (30) days' written notice to Licensee to
comply with any other of Licensee's obligations hereunder.
21
<PAGE> 52
15. EXPIRATION OR TERMINATION OF AGREEMENT.
Upon expiration or termination of this Agreement, all rights granted to
Licensee herein shall forthwith revert to Licensor with the following
consequences:
a) All unpaid Royalties shall be due and payable in accordance with Section
6.1 hereof.
b) Licensor shall thereafter be free to license others to use the Licensed
Property in connection with the manufacture, advertisement, distribution and
sale of items identical or similar to the Licensed Products in the Licensed
Territory.
c) In the event of termination or expiration of this Agreement, other than a
termination by Licensor as a result of a material breach of this Agreement by
Licensee, Licensee may continue to sell for a period of one hundred eighty
(180) days after the effective date of termination all approved copies of the
units of the Licensed Product produced prior thereto.
16. CONFIDENTIAL INFORMATION.
Each of the parties shall keep in confidence and not disclose or make
available to any third party, without the written permission of the other
party, the terms of this Agreement and the proprietary information of the other
party made known to it under this Agreement, including without limitation any
information with respect to proposed Games prior to the date on which they are
First Released and any Master Disk or version thereof. This requirement of
confidentiality shall not apply to information that is a) in the public domain
through no wrongful act of the disclosing party; b) rightfully received by the
disclosing party from a third party who is not bound by a restriction of
nondisclosure; c) already in the disclosing party's possession without
restriction as to disclosure; or d) is required to be disclosed by applicable
rules and regulations of government agencies or judicial bodies. This
obligation of
22
<PAGE> 53
confidentiality: (a) shall survive termination of this Agreement and (b) shall
extend to any subcontractor of either party and each party agrees to obtain
from each such subcontractor a written agreement to abide by the foregoing
confidentiality requirements. Each of the parties shall be entitled to seek
injunctive or equitable relief to prevent the breach or threatened breach by
the other of the provisions of this Section and to secure its enforcement.
17. NOTICES.
Any notice, consent, approval, request, waiver or statement to be
given, made or provided for under this Agreement shall be in writing and deemed
to have been duly given (a) by its delivery personally or by express mail; or
(b) five (5) days after its being mailed, air express, registered or certified,
return receipt requested in a United States Post Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
23
<PAGE> 54
TO LICENSOR: Atari Games Corporation
c/o WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
WITH A COPY TO: Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
WITH A COPY TO: Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
or such other address as either party may designate by notice given as
aforesaid.
18. MISCELLANEOUS.
18.1 This Agreement is personal to Licensee as one party and Licensor as the
other party. Neither this Agreement nor any party's rights under it may be
assigned, in whole or in part, nor may Licensee's or Licensor's rights or
obligations hereunder be delegated, in whole or in part, to any person or party
without the prior written consent of the other party, except that any party may
assign its rights and delegate obligations to any of its direct or indirect
wholly-owned subsidiaries or affiliates or to any person, firm or corporation
owning or acquiring all or substantially all of the stock or assets of that
party, as long as that party remains fully liable for its obligations
hereunder. Any sale of all or substantially all of the assets or stock of
Licensor shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by the seller pursuant to the
terms of this Agreement, including its obligations with respect to Games and
the intellectual property from which they are
24
<PAGE> 55
derived. This Agreement shall bind the parties, their successors and permitted
assignees and delegees. Licensor as one party, and Licensee as the other
party, are each liable for their respective obligations under the terms of this
Agreement.
18.2 The entire understanding between the parties hereto relating to the
subject matter hereof is contained herein. This Agreement cannot be changed,
modified, amended or terminated except by an instrument in writing executed by
the parties hereto.
18.3 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 no waiver shall be deemed or
construed to be a waiver of such terms or conditions for the future or any
subsequent breach thereof.
18.4 This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between Licensor and Licensee, and
neither Licensor nor Licensee 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.
18.5 This Agreement shall be governed by the laws of the State of Illinois
applicable to contracts made and to be wholly performed in the State of
Illinois.
18.6 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, either such provision will be deemed amended to conform to such
laws or regulations without materially altering the intention of the parties or
it shall be stricken and the remainder of this Agreement shall remain in full
force and effect.
25
<PAGE> 56
18.7 This Agreement may be executed in counterparts each of which shall be
deemed an original and when taken together shall be deemed one and the same
document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATARI GAMES CORPORATION
By:
-------------------------
GT INTERACTIVE SOFTWARE CORP.
By:
-------------------------
26
<PAGE> 57
SCHEDULE A
[Description of Licensed Property as Set Forth in New Game Option Notice]
<PAGE> 58
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
SCHEDULE B
ROYALTIES
Licensee shall pay to Licensor royalties ("Royalties") computed as follows: (a)
with respect to Licensed Products which are subject to any Third Party Fees and
Royalties, an amount equal to the greater of (i) * of the actual Net Wholesale
Sales Price for each unit sold and not returned, or (ii) * of Licensee's average
Net Wholesale Sales Price for Front-line Home Video Games designed for play on
the same Designated Consumer Game Platform sold at Full Price and not returned
during the relevant Royalty Period; and (b) with respect to Licensed Products
which are not subject to any Third Party Fees and Royalties, an amount equal to
the greater of (i) * of the actual Net Wholesale Sales Price for each unit sold
and not returned, or (ii) * of Licensee's average Net Wholesale Sales Price for
Front-line Home Video Games designed for play on the same Designated Consumer
Game Platform sold at Full Price and not returned during the relevant Royalty
Period. The Royalty computed in accordance with clauses (a)(ii) and (b)(ii) of
the preceding sentence shall apply (A) for a period of one year from the date of
First Release of the Licensed Product by Licensee or its affiliates in each
Marketing Area with respect to Home Video Games released during the first two
(2) years of the Option Period, and (B) for a period of six (6) months from the
date of First Release of the Licensed Product by Licensee or its affiliates in
each Marketing Area with respect to Home Video Games released after the first
two (2) years of the Option Period. For purposes of this paragraph, a Licensed
Product shall be deemed "Front-line" if it is substantially equivalent to a Home
Video Game which has been released at a premium price by Licensor or its
licensees in the United States. Royalties for Licensed Products which are not
deemed Front-line products shall be calculated as provided in clauses (a)(i) or
(b)(i) of the first sentence of this paragraph. Solely for purposes of computing
Royalties in accordance with the first sentence of this paragraph, Licensed
Products shall not be deemed to be subject to any Third Party Fees and Royalties
if they are subject only to (x) de minimis Third Party Fees and Royalties
excluding developer royalties amounting to less than * in the aggregate of the
Net Wholesale Sales Price, or (y) royalties and other participations payable to
developers for services rendered in connection with the Licensed Product. In no
event shall the Royalty with respect to the sale of a Licensed Product at any
time be less than the Third Party Fees and Royalties (including royalties and
other participations payable to developers) payable with respect to such
Licensed Product.
Notwithstanding the foregoing, if at least twelve (12) months after the
date of the initial release by Licensee (the "First Foreign Sale") of a
Licensed Product subject to Third Party Fees and Royalties in each Marketing
Area, the Net Wholesale Sales Price of such Licensed Product has been reduced
from the original list price to the equivalent of (U.S.) * or less, then
Licensee may elect to pay to Licensor in lieu of the Royalty payable in
accordance with the first sentence of this Schedule B, an alternative royalty
(the "Alternative Royalty") equal to the greater of (i)
<PAGE> 59
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
* of the Net Wholesale Sales Price of such Licensed Product, plus an amount
equal to * of all Third Party Fees and Royalties payable with respect to the
sale of such Licensed Product or (ii) * of the Net Wholesale Sales Price of such
Licensed Product.
If at any time after March 31, 1996 or, with respect to new Designated
Consumer Game Platforms which are introduced subsequent to the date hereof, the
date on which such new Designated Consumer Game Platform is introduced, there
shall occur (a) a reduction in the standard platform royalties payable by
Licensee to Nintendo(R), Sega(R), Sony(R), or (b) any other Designated Consumer
Game Platform manufacturer with respect to the Licensed Products, or (b) a
reduction in landed unit manufacturing costs payable by Licensee to any Game
manufacturer, including, without limitation, any such reductions in platform
royalties or unit manufacturing costs which may result from reaching applicable
volume discount levels established by the Designated Consumer Game Platform
manufacturer or other Game manufacturer, then, in either or both such cases,
Licensee shall pay to Licensor, in addition to any Royalty otherwise payable
hereunder, an amount equal to * of the amount by which such platform royalty
and landed manufacturing costs have been reduced for each unit of Licensed
Product sold by Licensee. Such additional amounts shall be payable by
Licensee to Licensor at the time and in the manner specified in Section 6
above. Notwithstanding the foregoing, however, Licensee shall not be required
to pay to Licensor any such additional amounts based on reductions in platform
royalties and landed unit manufacturing costs payable in respect of Licensed
Products for the Sega Saturn and Sony PSX platforms unless and until such
platform royalties and landed unit manufacturing costs shall fall below *
Dollars per unit, and, in such cases, Licensee shall only be required to pay *
of the reduction in costs below * Dollars, as provided above.
All payments of Royalties by Licensee to Licensor hereunder shall either
be paid from Licensee's office in the United States or from Licensee's office
in the United Kingdom. Licensee shall be solely responsible for payment of,
and shall timely file and remit, any foreign taxes (including any foreign taxes
on Royalties required to be withheld at the source) related to this Agreement.
Licensee shall promptly assist Licensor as necessary in obtaining a United
Kingdom royalty tax withholding exemption, or with any other documentation
required concerning Licensee's operations outside the United States. If taxes
on Royalties payable hereunder imposed by any foreign jurisdiction are required
to be withheld at the source, Licensee shall remit such Royalties net of any
withholding taxes together with all appropriate documentation and reporting
forms.
The "Net Wholesale Sales Price" of Licensed Products shall be the price
invoiced to customers, less any price discounts, rebates or credits granted at
the time of sale and taxes invoiced to customers (including VAT). No deduction
shall be made for bad debts or other uncollected amounts, advertising
allowances, including cooperative advertising, or any other costs incurred in
manufacturing, selling or distributing the Licensed Products.
2
<PAGE> 60
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
ADJUSTMENTS TO ROYALTIES
Anything above to the contrary notwithstanding:
1. In cases where Licensed Products are sold by non-affiliated third party
sublicensees under sublicenses granted by Licensee in accordance with the
provisions of the Master Atari Home Video Agreement, Royalties shall be payable
by Licensee to Licensor hereunder equal to the sum of (a) an amount equal to
all Third Party Fees and Royalties payable with respect to the sale of such
Licensed Products, plus (b) * of the proceeds received by Licensee from such
sublicensee after deducting (i) a fee to Licensee equal to * of such net
proceeds, (ii) an amount equal to all Third Party Fees and Royalties, and,
(iii) in the case of non-affiliated third party sublicensees to whom Licensee
supplies the Licensed Product, Licensee's direct manufacturing and shipping
costs. In no event shall the Royalty per unit be less than * of such Third
Party Fees and Royalties.
2. If Licensee's Weighted Average Gross Profits as a percentage of sales
of Accepted Games under this Agreement and all Other Atari Home Video Game
Distribution and License Agreements other than Games with respect to which an
Alternative Royalty is payable, for the twelve (12) months ending June 30, 1997
are less than Licensee's Weighted Average Gross Profits as a percentage of
sales of Accepted Games under this Agreement and all Other Atari Home Video
Game Distribution and License Agreements other than Games with respect to which
an Alternative Royalty is payable, for the twelve (12) months ending December
31, 2000, then the Royalties otherwise payable by Licensee under this Agreement
and all Other Atari Home Video Game Distribution and License Agreements for the
first Renewal Option Year (ending June 30, 2002), if any, shall be increased,
as a percentage of Net Wholesale Sales Price, for each unit sold and not
returned, by an amount equal to * of the difference. If Licensee's Weighted
Average Gross Profits as a percentage of sales of Accepted Games under this
Agreement and all Other Atari Home Video Game Distribution and License
Agreements during the 12 months ended December 31, 2001, or any subsequent
12-month period during the Renewal Option Period, shall be greater or less than
Licensee's Weighted Average Gross Profits as a percentage of sales of Accepted
Games during the preceding 12-month period, then the Royalties otherwise
payable by Licensee under this Agreement and all Other Atari Home Video Game
Distribution and License Agreements shall be similarly increased or decreased
for the next Renewal Option Year by an amount equal to * of the difference, but
in no event shall Royalties payable by Licensor under this Agreement and all
Other Atari Home Video Game Distribution and License Agreements be reduced at
any time to an amount less than the amounts set forth in the first sentence of
this Schedule B. For purposes hereof, Licensee's "Weighted Average Gross
Profits" with respect to the sale of Accepted Games under this Agreement and
all Other Atari Home Video Game License Agreements shall mean the weighted
average, computed on a platform by platform basis, of (a) aggregate sales of
Accepted Games other than Games with
3
<PAGE> 61
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
respect to which an Alternative Royalty is payable, less (b) landed
manufacturing costs and platform royalties paid or payable with respect to such
Accepted Games. Any amounts actually paid or payable to Licensor by Licensee as
additional Royalties hereunder by reason of a reduction in platform royalties or
landed unit manufacturing costs, as provided above (including without limitation
any such amounts paid or payable by reason of a reduction in platform royalties
or landed unit manufacturing costs of Licensed Products for the Sega Saturn or
Sony PSX platforms below * Dollars per unit), shall be added back in determining
Weighted Average Gross Profits hereunder. For example, if Licensee's Weighted
Average Gross Profits as a percentage of sales of Accepted Games during the
twelve (12) months ended by June 30, 1997 are *, and Licensee's Weighted Average
Gross Profits during the twelve months ending December 31, 2000 are * of sales
of Accepted Games, then the Royalty otherwise payable by Licensee to Licensor as
a percentage of Net Wholesale Sales Price during the first Renewal Option Year
(ending June 30, 2002) shall be increased by * of the difference, or *.
3. If the Licensed Product shall incorporate Computer Software in the form
of a cartridge, as opposed to a CD-ROM disk or other device containing the
computer game code (a "Cartridge-Based Product"), Licensee may elect to adjust
the Royalties otherwise payable with respect to sales of such Cartridge-Based
Product in a Marketing Area as follows: The "Cartridge Margin" for such
Cartridge-Based Product shall be calculated by subtracting from * the sum of
(i) the applicable percentage Royalty with respect to sales of such
Cartridge-Based Product, determined in accordance with the first sentence of
this Schedule B above, and (ii) the landed unit cost of such Cartridge-Based
Product, stated as a percentage of the Net Wholesale Sales Price therefor. If
the Cartridge Margin is less than the applicable percentage Royalty otherwise
payable on sales of such Cartridge-Based Products, the applicable percentage
Royalty shall be reduced by an amount equal to * of the difference between such
percentage Royalty and the Cartridge Margin, provided, however, that in no
event shall the Royalty payable with respect to sales of Cartridge-Based
Products be less than the Third Party Fees and Royalties payable with respect
thereto.
For example, if the Royalty percentage rate determined in accordance with
the first sentence of this Schedule B is * for a Cartridge-Based Product having
a Net Wholesale Sales Price in a given Marketing Area of * Dollars and a
landed unit cost of * Dollars (i.e., * of Net Wholesale Sales Price), the
Cartridge Margin for such Cartridge-Based Product would be *. Since the
Cartridge Margin * is less than the applicable percentage Royalty *, the
applicable percentage Royalty shall be reduced by * of the difference, or *,
such that the adjusted Royalty percentage payable on sales of such
Cartridge-Based Product in the Marketing Area will be *.
4
<PAGE> 62
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
RECOUPMENT.
1. Licensee shall be entitled to apply the Royalties applied or accrued
under this Agreement (the "Recoupable Amount"), to recoup the * Dollar Minimum
Guaranteed Advance Royalty paid by Licensee to WMS Industries Inc. pursuant to
Section 3 of the Master Atari Home Video Agreement and the Master Atari PC
Agreement (as that term is defined in the Master Atari Home Video Agreement),
until such Recoupable Amount together with the Recoupable Amounts applied or
accrued by Licensee under any other Atari Home Video Game Distribution and
License Agreement entered into by Licensee pursuant to the Master Atari Home
Video Agreement ("Other Atari Home Video Game Distribution and License
Agreements") and under any Atari Home Computer Software License Agreement
entered into by Licensee pursuant to the Master Atari PC Agreement (and to the
extent applicable amounts which may be recouped against such Minimum Guaranteed
Advance Royalty pursuant to the GTIS Master Home Video Agreement and the GTIS
Master PC Agreement) equal * Dollars; provided, however, that (i) to the extent
that the aggregate of all Recoupable Amounts applied or accrued under this
Agreement and the Other Atari Home Video Game Distribution and License
Agreements and under any Atari Home Computer Software License Agreement entered
into pursuant to the Master Atari PC Agreement between the Effective Date and
one year after the Effective Date exceed the installment of the Minimum
Guaranteed Advance Royalty paid on the Effective Date, such excess shall be
paid to WMS Industries Inc. and applied in reduction of the installment of the
Minimum Guaranteed Advance Royalty payable one year after the Effective Date
under the Master Atari Home Video Agreement and the Master Atari PC Agreement.
2. Until Licensee shall have fully recouped the * Minimum Guaranteed
Advanced Royalty, Licensor shall pay over to Licensee, Licensor's share of net
profits from the exploitation of the Licensed Products in Japan, and all
amounts so paid over to Licensee shall be deemed to constitute additional
Recoupable Amounts (as that term is used above) under this Agreement.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
Licensee shall be permitted to distribute free and promotional goods
without the payment of any Royalties or other royalties thereon, subject to the
provisions of Section 1 above and within the following territorial and quantity
limits:
United Kingdom,
Germany, Scandinavia,
Benelux, Italy, Spain, and
Australia: * units per country
Other Countries: * units per country
5
<PAGE> 63
No Royalties shall be payable by Licensee to Licensor in excess of any
Third Party Fees and Royalties in connection with the sale by Licensee of
"close-outs." For purposes hereof, "close-outs" shall mean any Licensed
Products that are sold for a price no greater than the sum of direct
manufacturing and shipping costs plus platform royalties and any Third Party
Fees and Royalties.
6
<PAGE> 64
SCHEDULE C
MARKETING AREAS
The following countries or related groups of countries shall each be
deemed a single Marketing Area:
United Kingdom and Ireland*
France*
Germany, Switzerland and Austria*
Benelux*
Spain and Portugal*
Italy*
Scandinavia
Former Eastern Bloc and the Baltic States (Latvia, Lithuania, Estonia)
Russia and Rest of the CIS
Rest of Europe (including Turkey)
Africa
Middle East
India and Pakistan
China (PRC excluding Hong Kong and Macao)*
Rest of Asia
Australia and New Zealand
Brazil
Rest of South and Central America and the Caribbean
_____________________
* Denotes Key Marketing Area
<PAGE> 65
WMS Industries Inc.
3401 North Carolina Avenue
Chicago, IL 60618
March 27, 1996
GT Interactive Software Corp.
16 East 40th Street
New York, NY 10016
Re: Japan Territory
Gentlemen:
Reference is made to the GTIS Master Option and License Agreement dated
December 28, 1994, as amended (the "GTIS Master PC Agreement"), the GTIS Master
Option and License Agreement (Home Video Games) dated March 31, 1995, as
amended(the "GTIS Master Home Video Agreement"), the Master Option and License
Agreement for Atari PC Games dated March 27, 1996 (the "Master Atari PC
Agreement") and the Master Option and License Agreement for Atari Home Video
Games dated March 27, 1996) (the "Master Atari Home Video Agreement"). The GTIS
Master PC Agreement, the GTIS Master Home Video Agreement, the Master Atari PC
Agreement and the Master Atari Home Video Agreement are collectively referred
to herein as the "Master Agreements."
This will confirm our agreement that during the "Japan Territory
Period," as that term is defined below, the Licensed Territory, as that term is
defined in the license and distribution agreements annexed as Exhibit A to the
Master Agreements, shall not exclude Japan. The Japan Territory Period shall
mean the period beginning on the Effective Date, as that term is defined in the
Master Atari Home Video Agreement, and ending on the date which is the later to
occur of (i) two years after the Effective Date, or (ii) one year after either
GTIS or WMS gives written notice to the other of its decision to terminate the
Japan Territory Period; provided, however, that if such notice is given by WMS,
the termination shall not be effective unless on the designated termination date
WMS directly or indirectly owns not less than 49% of an entity which (i) is or
intends to become a distributor of home video or personal computer games in
Japan, and (ii) conducts or intends to conduct meaningful business in Japan. If
such entity does not intend to distribute both home video and personal computer
games in Japan, then the aforesaid termination shall be effective only as to the
category of games (home video games or personal computer games) which such
entity does intend to distribute. During the Japan Territory Period, Japan shall
be deemed added to Schedule C to the Master Atari Home Video Agreement and the
GTIS Master Home Video Agreement and shall be deemed designated as a Key
Marketing Area as such term is defined therein. In addition, anything in this
letter, the Master Agreements or licenses issued pursuant to the Master
Agreements to the contrary notwithstanding, GTIS shall pay to the WMS Group and
shall have no right to recoup any Royalties attributable to Licensed Products
sold in Japan during the Japan Territory Period pursuant to the licenses issued
under the GTIS Master Home Video Agreement.
After termination of the Japan Territory Period, (i) licenses entered
into during the Japan Territory Period and still in effect on the date of
termination of such period shall continue for their term, and (ii) with respect
entered into after the Japan Territory Period, the Licensed Territory shall
exclude Japan, and the terms of applicable Master Agreements and related
license agreements shall apply.
Please indicate your agreement to the foregoing by signing this letter
in the place provided below.
Very truly yours,
WMS INDUSTRIES INC.
By: /s/ Neil Nicastro
Accepted and Agreed To:
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
<PAGE> 1
EXHIBIT 10.15
CERTAIN INFORMATION HAS BEEN OMITTED UNDER A
CONFIDENTIAL TREATMENT REQUEST MADE PURSUANT TO RULE 406
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
MASTER OPTION AND LICENSE AGREEMENT FOR ATARI PC GAMES
This Master Option and License Agreement (the "Agreement") is made and
entered into the 27th day of March, 1996, by and among WMS INDUSTRIES INC.
("WMS"), a Delaware corporation with offices at 3401 North California Avenue,
Chicago, Illinois 60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a
Delaware corporation with offices at 16 East 40th Street, New York, New York
10016.
W I T N E S S E T H:
WHEREAS, Williams Interactive Inc. ("WII"), a wholly-owned subsidiary of
WMS, has entered into an agreement with Warner Communications Inc. for the
acquisition of the stock of Atari Games Corporation ("AGC"); and
WHEREAS, AGC is engaged in the business of designing, manufacturing and
selling coin-operated amusement games and software products for dedicated home
game systems and multipurpose home computers; and
WHEREAS, GTIS is engaged in the business of publishing, manufacturing and
distributing entertainment software products; and
WHEREAS, GTIS desires to acquire certain rights from WMS and AGC and
<PAGE> 2
other subsidiaries of AGC with respect to Games, as such term is defined
herein, and WMS desires to grant and to cause AGC to grant such rights to GTIS;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 "Accepted Game" shall mean any Game with respect to which GTIS has
received a license or has exercised an option to acquire a license provided for
in Section 2 hereof.
1.2 "AGC" shall have the meaning ascribed in the first recital of this
Agreement.
1.3 "Atari Game" shall mean (i) any game developed or acquired by or on behalf
of AGC or entities which were affiliates of AGC prior to AGC being acquired by
WII pursuant to the Stock Purchase Agreement, including, without limitation,
those games listed on Schedule 1 hereto, and any adaptations of such games for
other platforms, and (ii) any game currently in development or developed
subsequent to such acquisition by or on behalf of AGC or a member of the Atari
Group, or developed, in whole or in substantial part, by any person or persons
who were employees of AGC or a member of the Atari Group as of the closing date
of such acquisition and who are employees of any member of the WMS Group at the
time of such development, and any adaptations of such games for other
platforms. For purposes of this Section, employees shall be deemed to include
independent contractors who work a substantial portion of their time at the
facilities of any member of the WMS Group.
1.4 "Atari Group" shall mean AGC, or any entity, a majority of whose capital
stock is owned directly or indirectly by AGC or with respect to which during
the term
2
<PAGE> 3
of this Agreement, AGC, directly or indirectly, has the legal power, without
the consent of any third party, to direct the acquisition of rights to or
exploitation of Games on Designated Multipurpose Computer Platforms.
1.5 "Atari Home Computer Software Distribution and License Agreement" shall
mean an agreement for the license of an Accepted Game for use solely on
Designated Multipurpose Computer Platforms in the form of Exhibit A annexed
hereto, as the same may be amended from time to time by written agreement of
the parties thereto.
1.6 "Designated Multipurpose Computer Platforms" shall mean IBM PC or Apple
Macintosh or other compatible multipurpose home computers which utilize floppy
disks or CD-ROMs or other stand alone devices which may hereafter replace or
supplement floppy disks or CD-ROMs in all operating systems now known or
hereafter developed or designed for use on the aforesaid multipurpose home
computers. Designated Multipurpose Computer Platforms shall not for purposes
of this Agreement include dedicated home game systems, such as those marketed
by Nintendo(R), Sega(R), Atari(R), Sony(R), etc.
1.7 "Early Termination Event" shall mean AGC ceasing to be at least 50.1%
owned by a member of the WMS Group, or the Atari Group transferring a majority
of its intellectual property assets and licenses to a person or entity who is
not a member of the WMS Group.
1.8 "Effective Date" shall mean the date WII closes the acquisition of AGC
pursuant to the Stock Purchase Agreement.
1.9 "First Release" or "First Released" shall have the meaning ascribed in
Section 2.4 hereof.
3
<PAGE> 4
1.10 "Game" shall mean any coin-operated video game (including kits), any home
video game and any on-line game which is an Atari Game and which is released or
intended to be released, by any member of the WMS Group for sale in commercial
quantities in the normal course of business. Home video games shall include
games designed for play on dedicated home game systems, such as those marketed
by Nintendo, Sega, Atari, Sony, etc. as well as on multipurpose home computers,
such as those marketed by IBM and Apple.
1.11 "Game Version", or version of a Game, or any similar phrase, whether or
not capitalized, shall mean the version of a Game designed to play on a
specific Designated Multipurpose Computer Platform.
1.12 "GTIS" shall mean GTIS or any affiliate of GTIS to whom any rights to
exploit any Accepted Games granted hereunder may be sublicensed. An affiliate
of GTIS shall refer to an entity, a majority of whose capital stock is owned
directly or indirectly by GTIS or with respect to which during the term of this
Agreement, GTIS, directly or indirectly, has the legal power without the
consent of any third party to direct the manufacture, distribution or sale of
Accepted Games.
1.13 "GTIS Master Home Video Agreement" shall mean the GTIS Master Option and
License Agreement (Home Video) dated March 31, 1995, as amended, among WMS,
Williams Electronics Games, Inc., Midway Manufacturing Company, Williams
Entertainment Inc. and GTIS.
1.14 "GTIS Master PC Agreement" shall mean the GTIS Master Option and License
Agreement dated December 28, 1994, as amended, among WMS, Williams Electronics
Games, Inc., Midway Manufacturing Company, Williams Entertainment Inc. and
4
<PAGE> 5
GTIS.
1.15 "Master Atari Home Video Agreement" shall mean the Master Option and
License Agreement for Atari Home Video Games being executed simultaneously
herewith.
1.16 "Master Disk" shall mean a CD-ROM disk or floppy disk or any other stand
alone devices which may hereafter replace or supplant CD-ROM or floppy disks,
containing the source code utilized by the Atari Group for an Accepted Game.
1.17 "Milestones" shall mean the defined tasks in the process of the
development of a Technically Acceptable Master Disk as are deemed sufficiently
important such that the achievement of such tasks will entitle the developer to
receive a payment, the amount of such payment, the standards for approval which
will entitle that developer to receive such payment and the circumstances under
which the development arrangement may be terminated prior to completion.
1.18 "Minimum Guaranteed Advance Royalty" shall have the meaning ascribed in
Section 3 hereof.
1.19 "New Game Option Notice Date" shall have the meaning ascribed in Section
2.4 hereof.
1.20 "Option Period" shall mean the period commencing on the Effective Date and
ending on the earlier to occur of (i) the expiration date, including any
extensions thereof, of GTIS' first option to acquire licenses pursuant to
Section 2.1 of the GTIS Master PC Agreement, or (ii) the first date after the
Effective Date on which an Early Termination Event occurs.
5
<PAGE> 6
1.21 "Pirate" shall mean an individual or entity which counterfeits a game or
sells counterfeit games.
1.22 "Projects in Process" shall have the meaning ascribed in Section 2.3
hereof.
1.23 "Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated
February 23, 1996 between Warner Communications Inc. and WII pursuant to which
Warner Communications has agreed to sell and WII has agreed to purchase all of
the outstanding stock of AGC.
1.24 "Technically Acceptable Master Disk" shall mean a completed and
functioning Master Disk for the Accepted Game in a format substantially ready
to be reproduced and manufactured for retail distribution and the instruction
manual therefor. The Accepted Game contained in the Technically Acceptable
Master Disk will have been alpha and beta tested and all known material bugs
and defects will have been corrected.
1.25 "WMS Group" shall mean WMS or any subsidiary, affiliate or other entity, a
majority of whose capital stock is owned directly or indirectly by WMS or with
respect to which during the term of this Agreement, WMS, directly or
indirectly, has the legal power, without the consent of any third party, to
direct the acquisition of rights to or exploitation of Games on Designated
Multipurpose Computer Platforms.
2. GRANT AND TERMINATION OF OPTION; EXERCISE OF OPTION.
2.1 Effective from and after the Effective Date, the Atari Group hereby grants
to GTIS a first option to acquire a license, in the form of the Atari Home
Computer Software Distribution and License Agreement, to manufacture,
distribute and sell versions of the
6
<PAGE> 7
Games for use solely on Designated Multipurpose Computer Platforms, with respect
to (i) Projects in Process and (ii) other new Games First Released by the Atari
Group during the Option Period.
2.2 The Atari Group shall not grant a license to any third parties to
manufacture, distribute and sell versions of a Game for use on any Designated
Multipurpose Computer Platforms if such Game would be subject to GTIS' first
option right to manufacture, distribute and sell versions of such Game on
Designated Multipurpose Computer Platforms, as specified in Section 2.1 hereof,
until such time as GTIS shall have declined to acquire a license, or the option
periods specified in Sections 2.3, 2.4 and 2.5 hereof, whichever is applicable,
shall have expired, or the applicable Atari Home Computer Software License
Agreement shall otherwise permit. GTIS understands, acknowledges and agrees
that (i) on the Effective Date the Atari Group's library of Games, as well as
Projects in Process and subsequent versions of Games, may be subject to rights
held by third parties, including affiliates of Warner Communications Inc. who
are not members of the Atari Group; any license or rights acquired by GTIS
hereunder shall be subject to such third party rights and the form of Atari Home
Computer Software and License Agreement will be deemed modified to the extent so
required; (ii) with respect to Games manufactured by the Atari Group under
license from third parties, the rights granted by the Atari Group to GTIS cannot
exceed the rights obtained by and will be subject to the limitations imposed on
the Atari Group from such third party and the form of Atari Home Computer
Software Distribution and License Agreement will be deemed modified to the
extent so required; (iii) although the Atari Group is developing Games in the
normal course of business, the Atari Group is under no obligation to develop
Games or to present any
7
<PAGE> 8
minimum number of Games to GTIS under this Agreement; (iv) under certain
circumstances the ownership of the Atari Group may revert to Warner
Communications Inc. pursuant to the Stock Purchase Agreement and the documents
executed in connection therewith; and (iv) Williams/Nintendo, Inc. (a joint
venture company in formation owned by a wholly owned subsidiary of WMS and
Nintendo of America Inc.) has been granted a first right of negotiation with
respect to the exclusive right to produce and distribute certain coin-operated
games for all formats, including home computers, if those games are implemented
for play upon certain coin-operated hardware systems proprietary to Nintendo
and its licensors.
2.3 Schedule 2 hereto sets forth the titles of multipurpose home computer
games currently under development by the Atari Group for which the Atari Group
has heretofore made development advances and as to which the Atari Group may
have the right to grant licenses to GTIS to manufacture, distribute and sell
versions of the Game for use on one or more Designated Multipurpose Computer
Platforms ("Projects in Process"). Upon request of GTIS, GTIS shall be
provided the opportunity to review all existing third party agreements relating
to Projects in Process, as well as other games in the Atari Group library in
respect of which GTIS may have rights hereunder, subject to any applicable
confidentiality provisions in such agreements. Subject to rights of
distribution and other agreements existing on the date hereof, GTIS shall have
a period of sixty (60) days from the Effective Date to notify AGC in writing
that it elects to exercise its option to license one or more Projects in
Process under this Agreement. The Game versions included in GTIS' notice of
election shall become Accepted Games under this Agreement, except that the
Atari Group shall be under no obligations with respect to the time or method of
development of a Technically Acceptable Master Disk and GTIS
8
<PAGE> 9
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
shall not be required to fund * of the development costs upon receipt of a
Technically Acceptable Master Disk. GTIS shall be required to pay AGC * of all
developer royalties payable with respect to sales of such Games without right
of recoupment. GTIS shall have no further rights with respect to Projects in
Process not accepted within said 60 day period. The Atari Group shall have the
right to terminate the development of any Projects in Process at any time for
any reason.
2.4 With respect to Games other than Projects in Process which are First
Released by the Atari Group for the coin-operated, home video or on-line
markets after the Effective Date, including Games which were in the Atari Group
library on the Effective Date but which are re-released with new copyright
notices or other changes after the Effective Date, the Atari Group shall notify
GTIS in writing as to the existence of a Game within thirty (30) days after the
Atari Group has begun to ship the Game for use commercially in the ordinary
course of business (and not merely for the Atari Group's test purposes). The
date of such notice is hereinafter referred to as the "New Game Option Notice
Date." A Game shall be deemed First Released by the Atari Group on the date of
the first commercial shipment in the normal course of business and with respect
to on-line Games when such Games are first commercially sold to subscribers to
the on-line service. If the Atari Group does not actually make a commercial
shipment of a Game notwithstanding its original intention to do so, then the
Atari Group shall notify GTIS of its decision not to make such shipments and
the New Game Option Notice Date for such Game shall be deemed to be the date of
such notice. Each notice given in accordance with this Section 2.4, (i) shall
identify the Game, (ii) shall describe in reasonable
9
<PAGE> 10
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
detail its characteristics and method of play, and (iii) shall set forth a
proposed budget and time frame for developing Technically Acceptable Master
Disks for such game for play on Designated Multipurpose Computer Platforms, and
the identity of the proposed developer or developers. GTIS shall have a
reasonable opportunity to consult with the Atari Group prior to the Atari Group
determining the proposed budget, time frame and developers, but the final
decision shall be made by the Atari Group. Each such notice relating to a Game
manufactured by the Atari Group pursuant to a license from or subject to other
agreement with any third party shall set forth a summary of any material
limitations upon the scope of the license in respect thereof which may be
granted to GTIS hereunder, the amount or method of determining third party
royalties payable thereunder and the material terms of such license or other
agreement applicable to platforms other than Designated Multipurpose Computer
Platforms. With respect to each Game as to which GTIS receives written notice
as hereinabove provided, GTIS shall have a period of ninety (90) days from the
New Game Option Notice Date to notify AGC in writing that it elects to exercise
its option to license the Game. Upon receipt of such notice from GTIS, the
Atari Group will proceed to develop or retain a third party to develop a
Technically Acceptable Master Disk for such Game for play on one or more
Designated Multipurpose Computer Platforms as identified in the budget and will
use reasonable efforts to complete or cause the completion of such development
within twelve (12) months of receipt of such notice from GTIS. In addition to
any other payments made hereunder or under any Atari Home Computer Software
Distribution and License Agreement, subject to the provision of Paragraph 2.7
and Paragraph 2.11 below, GTIS shall pay to AGC * of the actual costs of such
code
10
<PAGE> 11
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
development simultaneously with receipt of a Technically Acceptable Master Disk
and a reasonably detailed written summary of the development costs, none of
which payment shall be recoupable by GTIS or repayable to GTIS in any manner or
for any reason. It is understood that the development budget shall include a
compensation expense of up to * for each Game version if the Atari Group
employs a dedicated in-house producer for the purpose of such development.
2.5 If, by itself, or through use of a third party developer, the Atari Group
determines to develop or acquire a Game for play on multipurpose home computers
that it has not theretofore developed or acquired for the coin-operated or
dedicated home game player market, it shall notify GTIS in writing as to its
intention, which notice shall describe in reasonable detail the proposed
characteristics of the Game and shall set forth an estimated budget and time
frame for developing Technically Acceptable Master Disks for such Game for play
on one or more Designated Multipurpose Computer Platforms and the identity of
the proposed developers. Each such notice relating to a Game the rights to
which are derived from a license or other agreement with a third party shall
set forth a summary of any material limitations upon the scope of the license
in respect thereof which may be granted to GTIS hereunder, the amount or method
of determining third party royalties payable thereunder and the material terms
of such license or other agreement applicable to platforms other than
Designated Multipurpose Computer Platforms. GTIS shall have an opportunity to
consult with the Atari Group prior to the Atari Group determining the proposed
budget, time frame and developers, but the final decision shall be made by AGC.
GTIS shall have a period of fifteen (15) days from the date of such notice
11
<PAGE> 12
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to notify AGC in writing that it elects to exercise its option to license the
Game. Upon receipt of such notice from GTIS, the Atari Group will proceed to
develop or retain a third party to develop a Technically Acceptable Master Disk
for such Game for play on one or more Designated Multipurpose Computer Platforms
as identified in the budget and will use reasonable efforts to complete or cause
the completion of such development within the estimated time frame set forth in
the notice. In addition to any other payments made hereunder or under any Atari
Home Computer Software Distribution and License Agreement, subject to the
provisions of Paragraphs 2.7 and 2.11 below, GTIS shall pay to AGC * of the
actual costs of such code development simultaneously with receipt of a
Technically Acceptable Master Disk and a reasonably detailed written summary of
the development costs, none of which payment shall be recoupable by GTIS or
repayable to GTIS in any manner or for any reason. It is understood that the
development budget shall include a compensation expense of up to * for each Game
version if the Atari Group employs a dedicated in-house producer for the purpose
of such development.
2.6 Any Game as to which GTIS has exercised its option within the notice
periods specified in Sections 2.3, 2.4 and 2.5 above shall become an Accepted
Game for all purposes of this Agreement. With respect to each Accepted Game,
GTIS and the member of the Atari Group which is manufacturing such Game shall
enter into an Atari Home Computer Software Distribution and License Agreement
which shall be dated the earlier of: the date GTIS shall have given notice of
its acceptance thereof, or the date which is sixty (60) days following the date
of the option notice. If either of such parties shall wrongfully refuse to
enter into an
12
<PAGE> 13
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Atari Home Computer Software Distribution and License Agreement with respect to
any Accepted Game, then, in addition to any other rights of the non-defaulting
party hereunder, at the option of the non-defaulting party, such Atari Home
Computer Software Distribution and License Agreement shall be deemed to have
been entered into as of the date on which GTIS shall have exercised its option
to acquire the license of such Accepted Game as provided herein. GTIS
understands and agrees that it will have no rights whatsoever in respect of any
Game which does not become an Accepted Game in accordance with the terms of
this Agreement and for which an Atari Home Computer Software Distribution and
License Agreement is not duly executed (or deemed executed as provided above),
and the Atari Group may exploit its rights in any Game which does not become an
Accepted Game in any manner it sees fit, free and clear of this Agreement.
2.7 The parties hereto acknowledge that notwithstanding efforts to produce
reliable development budgets under Sections 2.4 and 2.5 hereof, in certain
instances the actual costs of development may exceed the budgeted costs. In
those instances, AGC shall notify GTIS of the projected budget overrun (the
"Overrun Notice") promptly after AGC becomes aware of such overrun.
2.7.1 The following provisions shall apply to budget overruns in respect of
Games which became Accepted Games under Section 2.4 hereof ("Section 2.4
Games"); provided, that this Section 2.7.1 shall not apply to Accepted Games as
to which GTIS has exercised its rights of review and approval under Section 2.11
hereof. If the actual cost of development of a Section 2.4 Game being developed
by a third party developer is not more than * of the budget approved by GTIS,
GTIS will pay AGC * of such actual costs as provided in
13
<PAGE> 14
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Section 2.4 hereof. If the actual costs of development of a Section 2.4 Game
exceed * of the budget with respect to a Game being developed by a third party
developer or * of the budget with respect to a Game being developed in-house by
the Atari Group, whichever is applicable, GTIS shall have the right, by notice
to AGC given within ten (10) days of receipt by GTIS of the Overrun Notice, to
elect to bear * of the cost of such overrun or to decline to do so. A failure
by GTIS to give such notice within such ten (10) days shall be deemed an
election to decline to bear such costs. If GTIS so declines, AGC shall be
entitled to elect to (i) abandon the development, in which event AGC shall bear
the entire cost of the development, or (ii) proceed with the development with
GTIS, in which case GTIS shall pay * of (A) the actual costs of the development
up to * of the budget with respect to a Game being developed by a third party
developer or (B) * of the budget with respect to a Game being developed in-house
by the Atari Group, whichever is applicable, as provided in Section 2.4 and AGC
shall bear the balance of the costs of such development.
2.7.2 The following provisions shall apply to budget overruns in respect of
Games which become Accepted Games under Section 2.5 hereof ("Section 2.5
Games"); provided, that this Section 2.7.2 shall not apply to Accepted Games as
to which GTIS has exercised its rights of review and approval under Section 2.11
hereof. If the actual cost of development of a Section 2.5 Game being developed
by a third party developer is not more than * of the budget approved by GTIS,
GTIS will pay AGC * of such actual costs as provided in Section 2.5 hereof. If
the actual costs of development of a Section 2.5 Game exceed * of the budget
with respect to a Game being developed by a third party developer or * of the
budget
14
<PAGE> 15
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
with respect to a Game being developed in-house by the Atari Group, whichever is
applicable, GTIS shall have the right, by notice to AGC given within ten (10)
days of receipt by GTIS of the Overrun Notice, to elect to bear * of the cost of
such overrun or to decline to do so. A failure by GTIS to give such notice
within such ten (10) days shall be deemed an election to decline to bear such
costs. If GTIS so declines, AGC shall have the right to abandon the
development, in which event AGC shall bear the entire cost of the development,
or to elect the options provided below in this Section 2.7.2. AGC may elect (i)
to proceed with the development with GTIS in which case GTIS shall pay * of (A)
the actual costs of the development up to * of the budget with respect to Games
being developed by a third party developer or (B) * of the budget with respect
to Games being developed in-house, whichever is applicable, and AGC shall bear
the balance of the costs of such development; or in the case of a Section 2.5
Game being developed by a third party developer who is not contemporaneously
developing the Game for AGC for other platforms, such as coin-operated or
dedicated home games systems, AGC may elect to proceed with the development
without GTIS involvement, in which case AGC shall bear the entire costs of
development, and the Game shall no longer be deemed an Accepted Game and GTIS
shall have no further rights in such Game.
2.7.3 Subject to the provisions of Section 2.11 hereof, GTIS shall bear * of the
actual costs of development of any Section 2.4 Game or Section 2.5 Game as to
which GTIS has exercised its rights of review and approval under Section 2.11.
2.7.4 Anything herein to the contrary notwithstanding, on notice
15
<PAGE> 16
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
to GTIS and with consent of GTIS, which consent may not be unreasonably
withheld, AGC may elect to terminate development at any time prior to delivery
to GTIS of a Technically Acceptable Master Disk, at no cost to GTIS, if AGC
determines that further development work is not technically or economically
desirable. If GTIS fails to respond in writing to WMS' notice within ten (10)
Business Days after receipt thereof by GTIS, GTIS shall be deemed to have
consented to AGC's election to terminate development. If AGC should thereafter
determine to recommence development work, it will promptly notify GTIS which
will have the option on fifteen (15) days' notice to AGC to participate in such
renewed development on the same terms and conditions as if the original
development had continued uninterrupted. If GTIS withholds its consent to such
termination of development pursuant to this Section 2.7.4, GTIS shall (i)
promptly pay to AGC * of the costs of development to the date of AGC notice of
intent to terminate (excluding the budgeted compensation expense of the Atari
Group's dedicated in-house producer, if any); (ii) take over responsibility for
development of a Technically Acceptable Master Disk with the developer; and
(iii) bear the costs of development in excess of * of the budget. Upon receipt
by AGC of a notice from GTIS that GTIS has received a Technically Acceptable
Master Disk with respect to the Game, AGC shall pay to GTIS the amount, if any,
by which * of the actual costs of development up to * of the budget exceeds the
development costs theretofore paid by the Atari Group.
2.8 If GTIS has not exercised its option under Sections 2.4 or 2.5 above with
respect to a Game and if, before a member of the Atari Group enters into a
binding agreement with a third party for Designated Multipurpose Computer
Platform rights in such
16
<PAGE> 17
Game, there shall be a material change in design, a material decrease in the
development budget or a change in the identity of the developer from those
presented to GTIS before its declination to exercise its option, the Atari
Group will present such changed information to GTIS who shall have thirty (30)
days after receipt of such information to determine to elect to exercise its
option.
2.9 GTIS acknowledges that the Atari Group manufactures and sells Games for
many different entertainment platforms, including coin-operated games and home
games of all types, and that any Games in respect of which GTIS obtains rights
hereunder for exploitation on Designated Multipurpose Computer Platforms,
including rights under Section 2.5 hereof, may be developed by the Atari Group
for other entertainment platforms and GTIS will have no rights therein.
2.10 AGC agrees to use commercial efforts in its reasonable judgment, to
acquire rights to exploit Games in Designated Multipurpose Computer Platforms
when it acquires rights in Games from third parties or develops rights in Games
internally or through joint ventures. It is understood that with respect to
on-line Games, third parties may require such games to be exclusively offered
on-line, and GTIS shall have no rights hereunder with respect to such exclusive
on-line games.
2.11 Anything in Sections 2.4 or 2.5 to the contrary notwithstanding, in the
event that after March 31, 1996 the WMS Group desires to hire a third party
developer to develop a Technically Acceptable Master Disk for an Accepted Game,
GTIS shall have the right to review and approve (such approval not to be
unreasonably withheld) the proposed Milestones prior to the WMS Group entering
into a binding agreement with such developer (such right of review and approval
shall not extend to any terms of the developer agreement other than the
17
<PAGE> 18
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Milestones). The WMS Group shall notify GTIS in writing of its intention to
hire such third party developer and GTIS shall notify WMS in writing within five
(5) Business Days after receipt of the WMS Group notice that GTIS desires to
exercise its right of review and approval of Milestones. GTIS' failure to
timely notify WMS shall be deemed its election not to exercise such right of
review and approval. If GTIS shall exercise such right, GTIS and WMS shall
negotiate in good faith to reach agreement with respect to the proposed
Milestones as promptly as practicable. If such agreement is not reached within
ten (10) Business Days after receipt by WMS of GTIS' aforesaid notice, then WMS
may notify GTIS of Milestones which are acceptable to WMS and GTIS shall have
three (3) Business Days after receipt of such notice to accept such Milestones.
If GTIS does not accept such Milestones within such three (3) Business Day
period, WMS may proceed to enter into an agreement with such developer as if
GTIS had elected not to exercise its right of review and approval. If a
developer agreement is signed following acceptance by GTIS of the Milestones as
aforesaid, upon approval by GTIS and WMS of the material delivered and other
requirements of each of such Milestones, GTIS shall pay to WMS * of the
Milestone payments within five (5) Business Days after GTIS receives WMS'
invoice therefor. Such payment shall be credited against the obligations of
GTIS to pay WMS * of the actual costs of code development simultaneously with
the receipt of a Technically Acceptable Master Disk set forth in Sections 2.4
and 2.5. With respect to any Technically Acceptable Master Disk for which GTIS
is obligated to fund * of the Milestone payments, if WMS exercises its rights in
Section 2.7.4 to terminate development, the following shall apply: (1) if GTIS
consents to such termination, neither WMS nor GTIS shall be entitled to any
18
<PAGE> 19
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
reimbursement of the Milestone payments previously made by the other, or (2) if
GTIS withholds its consent to such termination, if permitted by the developer
agreement, GTIS may take over the responsibility for development of a
Technically Acceptable Master Disk with the developer and fund the balance of
the development costs. Upon receipt by WMS of a notice from GTIS that GTIS has
received a Technically Acceptable Master Disk with respect to the Game, WMS
shall pay to GTIS, the amount, if any, by which * of the original development
budget approved by WMS exceeds the Milestone payments previously made by WMS.
If GTIS has fully funded its obligations to make Milestone payments theretofore
due, GTIS may elect to terminate its obligations to make Milestone payments
with respect to future Milestones on which the developer has not yet commenced
work; provided that GTIS may not so elect unless the agreement with the
developer permits WMS to terminate its obligations to the developer by making
payments only for Milestones previously achieved or in work or GTIS agrees to
pay * of any costs of terminating the developer agreement. If GTIS properly
elects to terminate its obligation to make Milestone payments, (i) if WMS
agrees to such termination and also terminates the developer agreement, neither
WMS nor GTIS shall be entitled to any reimbursement of the Milestone payments
previously made by the other, or (ii) if WMS elects to continue development of
the Technically Acceptable Master Disk, GTIS shall be entitled to reimbursement
of the Milestone payments previously made by it upon completion by WMS of the
Technically Acceptable Master Disk, but GTIS shall be deemed to have waived any
future rights to distribute or license the version of the Game embodied in the
Technically Acceptable Master Disk. GTIS shall hold WMS harmless for any
claims by developers against the WMS
19
<PAGE> 20
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Group by reason of GTIS' failures to make Milestone payments under this
Section. WMS shall use its best efforts to cause agreements with developers
entered into after March 31, 1996 which relate to Technically Acceptable Master
Disks for which GTIS is making * of the Milestone payments to provide for GTIS
to have the right to assume the rights and obligations under that agreement
should WMS elect to terminate the agreement and GTIS elect to continue it. If
both WMS and GTIS elect to terminate a developer agreement and any proceeds are
subsequently generated from the abandoned project, the proceeds shall be shared
by WMS and GTIS in proportion to their Milestone payments made with respect to
such abandoned project. All ownership and rights in software, artwork,
literary text, designs and other works, and all intellectual property relating
thereto, which would have vested in a member of the WMS Group but for such
termination shall vest in such member of the WMS Group, not GTIS, even if GTIS
assumes the developer agreement, and the WMS Group shall remain entitled to all
of the benefits of the representations and warranties, indemnifications,
confidentiality provisions, restrictions, covenants and other obligations of
the developer which would survive termination of such agreement. The
provisions of this Section 2.11 are in all cases subject to the provisions of
Section 2.12. For developer agreements in respect of which GTIS has agreed to
make Milestone payments, the WMS Group shall provide GTIS a copy of the final
version of the developer agreement within ten (10) Business Days after the same
is signed; provided, however, that the WMS Group shall have the right to redact
any information in that agreement relating to third parties which does not
affect GTIS' rights or obligations.
2.12 If permitted under existing agreements with third parties, AGC
20
<PAGE> 21
agrees to submit its choice of each proposed third party developer to be
selected under Sections 2.4 and 2.5 of this Agreement to GTIS for GTIS'
approval, such approval not to be unreasonably withheld, and GTIS shall notify
AGC of its decision with respect to such developers within five (5) Business
Days after receipt by GTIS of AGC's notice. If the Technically Acceptable
Master Disk being developed is based upon a coin-operated Game which has been
released within the 24 month period preceding AGC's request for GTIS' approval
of the developer, or is released after such request for approval but prior to
the release of the home version of such Game, AGC shall have the final decision
in selecting the developer if a representative of AGC's coin-operated game
development group advises GTIS in writing that the selection of a particular
developer is important to such group. In all other circumstances, if GTIS
reasonably disapproves of the developer suggested by AGC, then that developer
shall not be used and a new developer shall be selected by AGC, subject to
GTIS' right of approval as provided above in this Section 2.12.
2.13 Royalties payable to AGC pursuant to Schedule B of the Atari Home Computer
Software Distribution and License Agreement are measured by the wholesale price
of Licensed Product. Accordingly, reasonably in advance of WMS' decision to
enter into a developer contract and reasonably in advance of GTIS' initial
release of the Licensed Product, GTIS shall advise WMS, at WMS' request, of
GTIS' expected pricing strategy and the reasons therefor. Nothing herein shall
be deemed to restrict GTIS' freedom in selecting wholesale sales prices it
considers appropriate, which shall be in GTIS' sole discretion.
2.14 If, under Section 2.1 of any Atari Home Computer Software Distribution and
License Agreement entered into under this Agreement, Licensor has granted
21
<PAGE> 22
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
written approval (which shall not be unreasonably withheld) to Licensee of a
sublicensee for the Licensed Property, such approval shall apply to the
sublicensing by that sublicensee of all Licensed Properties licensed to Licensee
under Atari Home Computer Software Distribution and License Agreements entered
into under this Agreement, subject to the following: (i) the sublicense
agreements shall contain provisions with respect to quality of Licensed Product,
trademarks, copyrights, materials, other intellectual property rights, rights of
additional sublicensing or assignment, termination rights, confidentiality,
accounting, auditing, reporting and payment procedures in form agreed to by GTIS
and WMS, and the form as so agreed to may be used by all approved sublicensees
described in clause (iii) below; provided that if such form is not so used, any
other form to be used shall be subject to prior approval as provided in this
subsection (i); (ii) no such blanket approval shall be deemed given with respect
to Licensed Properties as to which approval requirements imposed by third
parties, such as the NFL and NBA, apply, (iii) if the sublicense is for a
Marketing Area other than those designated as Key Marketing Areas in such Atari
Home Computer Software Distribution and License Agreement and if the expected
sales volume in such Marketing Area, in GTIS' good faith judgment, is an average
of * units or less per SKU per year, Licensee will not be required to obtain
Licensor's prior written approval of the terms of such license but Licensee will
be required to provide a copy of each sublicense to Licensor within ten (10)
Business Days after GTIS enters into such sublicense; and (iv) if the Marketing
Area is designated as a Key Marketing Area or if, in GTIS' good faith judgment,
the expected sales volume for such Marketing Area is more than an average of *
units per SKU per year, Licensee will be required to obtain Licensor's prior
written
22
<PAGE> 23
approval, which Licensor will not unreasonably withhold, of the terms of a
sublicense for such Marketing Area even if the identity of the sublicensee has
been previously approved; provided, however, if a sublicense is for multiple
platforms and multiple games, the approval of the sublicense will be deemed to
be approval for all Games distributed under that sublicense (subject to clause
(ii)). Anything to the contrary notwithstanding, (x) if a previously approved
sublicensee becomes an Exporter (as such term is defined in Exhibit A to the
GTIS Master Home Video Agreement) or a Pirate, Licensee will immediately upon
becoming aware thereof notify Licensor of the identity of such Exporter or
Pirate and as soon as practicable terminate the sublicense upon request by
Licensor, and (y) Licensor and Licensee will review every two years the
identity of sublicensees, and those sublicensees who previously received
blanket approval as provided in the first sentence of this Section and who are
no longer considered acceptable by Licensor, in the exercise of Licensors'
reasonable judgment, will no longer have such blanket approval and will be
subject to Licensor's prior approval with respect to all future sublicenses in
accordance with the approval procedures set forth above. Licensee shall use
all reasonable efforts to cause each agreement with its sublicensees to permit
Licensee to terminate such agreement immediately if such sublicensee shall be
or become an Exporter or a Pirate.
2.15 Within 60 days from the Effective Date, GTIS shall have the right to
propose to AGC five multipurpose home computer game projects involving up to a
maximum of 13 titles from the existing library of Atari Group games listed on
Schedule 2 hereto. AGC shall have the right to veto up to three of the titles
selected and GTIS may replace any title so vetoed by selecting another
available title from the aforesaid library. If GTIS has not proposed all five
game projects within such 60 days, it may propose the remaining projects
thereafter, but
23
<PAGE> 24
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
such later projects may involve only such titles as AGC has not exploited
itself or through third parties. GTIS will pay all costs of such projects,
including Third Party Fees and Royalties, advertising and all manufacturing and
development costs. AGC will own all copyrights, trademarks, intellectual
property and code developed in connection with such projects. GTIS will pay
AGC a royalty of * of Net Wholesale Sales Price, as such term is defined in
Schedule B to the Atari Home Computer Software Distribution and License
Agreement, of such games. Sublicensing revenues shall be treated in the same
manner as sublicensing revenues from Accepted Games except that AGC's share
shall be * of such revenues instead of *. Bundling revenues will be treated
the same as sublicensing revenues. Royalties payable to AGC will be recoupable
against the Minimum Guaranteed Advance Royalty. AGC will have rights to
approve product and packaging quality and advertising and promotional materials
as provided in the distribution and license agreements to be entered into with
respect to each such project. Such distribution and licensing agreement shall
be substantially in the form of the Atari Home Computer Distribution and
License Agreement, with such changes therein as are required to reflect the
provisions of this Section 2.15.
3. MINIMUM GUARANTEED ADVANCE ROYALTY. In consideration for both the option
granted herein and in the Master Atari Home Video Agreement and as a guaranteed
advance royalty, GTIS is paying to WMS the aggregate sum of * Dollars ("Minimum
Guaranteed Advance Royalty") in installments as follows: * Dollars shall be
paid by wire transfer to WMS in immediately available funds on the Effective
Date and * Dollars shall be paid in immediately available funds on or before
one year after the Effective Date. It is
24
<PAGE> 25
understood that under no circumstances shall the WMS Group or the Atari Group
be required to repay any portion of such amounts nor shall GTIS be entitled to
any set off or to claim the right not to pay any portion of such amounts for
any reason; provided that GTIS shall be entitled to recoup such payments out of
royalties, to the extent provided in the Atari Home Computer Software
Distribution and License Agreements entered into pursuant to this Agreement and
the Atari Home Video Distribution and License Agreements entered into pursuant
to the Master Atari Home Video Agreement, and to the extent not so recouped
from those agreements, GTIS shall be entitled to recoup such payments out of
royalties to the extent provided in the GTIS Master PC Agreement and GTIS
Master Home Video Agreement and related license agreements.
4. REPRESENTATIONS AND WARRANTIES OF WMS. WMS represents and warrants that
this Agreement has been duly authorized, executed and delivered by WMS; WMS has
the full power and authority to enter into this Agreement and to perform its
obligations hereunder and this Agreement constitutes the valid and binding
obligation of WMS, enforceable in accordance with its terms, and the making of
this Agreement by WMS does not violate or conflict with any agreement, right or
obligation existing between WMS and any other person, firm or corporation.
5. REPRESENTATIONS AND WARRANTIES OF GTIS. GTIS represents and warrants that
this Agreement has been duly authorized, executed and delivered by GTIS; GTIS
has the full power and authority to enter into this Agreement and to perform
its obligations hereunder and this Agreement constitutes the valid and binding
obligation of GTIS enforceable in accordance with its terms; and the making of
this Agreement by GTIS does not violate or conflict with any agreement, right
or obligation existing between GTIS and any other person,
25
<PAGE> 26
firm or corporation.
6. CONFIDENTIAL INFORMATION. GTIS shall keep in confidence and not disclose
to any third party, without the written permission of AGC, the terms of this
Agreement and the proprietary information of the Atari Group made known to it
under this Agreement. Likewise, WMS and the Atari Group shall keep in
confidence and not disclose to any third party, without the written permission
of GTIS, the terms of this Agreement and the proprietary information of GTIS
made known to them under this Agreement. This requirement of confidentiality
shall not apply to information that is (a) permitted to be disclosed under an
Atari Home Computer Software Distribution and License Agreement; (b) in the
public domain through no wrongful act of the receiving party; (c) rightfully
received by the receiving party from a third party who is not bound by a
restriction of nondisclosure; (d) already in the receiving party's possession
without restriction as to disclosure; or (e) is required to be disclosed by
applicable rules and regulations of government agencies or judicial bodies. WMS
or GTIS shall not issue any press release or other public or trade announcement
with respect to the transactions contemplated by this Agreement unless the
issuing party shall have first consulted with the other with respect thereto and
obtained the other's prior written approval therefor, which approval will not be
unreasonably withheld or delayed. The obligations of confidentiality under this
Section 6 shall survive termination of this Agreement. With respect to this
Agreement and all Atari Home Computer Software Distribution and License
Agreements entered into in connection therewith, each of the AGC Group and GTIS
agree to use reasonable efforts to ensure that either of them may disclose the
proprietary information of the other (including, without limitation, the
software source code and tools relating to any Game) only to those persons
within their organizations who
26
<PAGE> 27
have a need to know such information in order to perform its obligations under
this Agreement and the Atari Home Computer Software Distribution and License
Agreements and any such disclosure shall be limited to the information which
needs to be known. Further, neither the AGC Group nor GTIS shall use any such
proprietary information for purposes other than the performance of its
obligations under this Agreement and the Atari Home Computer Software
Distribution and License Agreements.
7. NOTICES. Any notice, consent, approval, request, waiver or statement to be
given, made or provided for under this Agreement shall be in writing and deemed
to have been duly given (i) by its delivery personally or by express mail; or
(ii) five (5) days after its being mailed, air express, registered or certified,
return receipt requested, in a U.S. Post office addressed as follows:
To GTIS:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
With a copy to:
27
<PAGE> 28
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
To WMS:
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, TX 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
With a copy to:
Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 782-1964
or such other address as either party may designate by notice given as
aforesaid.
8. DEFAULT. In the event that GTIS shall default in any of its obligations
to
28
<PAGE> 29
make payment in full hereunder or under any Atari Home Computer Software
Distribution and License Agreement and the Atari Group or WMS has provided
notice of such default in accordance with the provisions of Section 7 hereof, if
GTIS has not cured such default in making payments hereunder within fifteen
(15) days of such notice, or within the grace periods provided in the Atari
Home Computer Software Distribution and License Agreement in respect of
payments thereunder, then, in addition to all other rights and remedies of the
Atari Group or WMS at law or in equity, at the option of the Atari Group or
WMS, all rights granted to GTIS under Section 2 of this Agreement shall be
deemed terminated and shall revert to the Atari Group, provided it is
understood that notwithstanding such termination, the Atari Home Computer
Software Distribution and License Agreements entered or deemed entered into
prior to such termination which are not in default shall remain in full force
and effect. No such termination shall in any way affect or diminish WMS' or
AGC's rights hereunder, including the right of WMS to receive the Minimum
Guaranteed Advance Royalty. Anything herein to the contrary notwithstanding,
the rights granted to GTIS under Section 2 of this Agreement shall not be
affected by an alleged default by Licensee under an Atari Home Computer
Software Distribution and License Agreement resulting from a bona fide dispute
between Licensor and Licensee provided that Licensee pays all undisputed
amounts to Licensor and all disputed amounts are paid into a bona fide third
party escrow account.
9. STOCK PURCHASE AGREEMENT CONDITIONS. This Agreement shall become
effective on the Effective Date and shall be null and void and of no further
force and effect if the Effective Date shall not have occurred by June 30,
1996. On the Effective Date, WMS shall cause AGC to execute an agreement of
assumption, whereby AGC shall assume all of the
29
<PAGE> 30
obligations of AGC and the Atari Group referred to in this Agreement.
Notwithstanding such assumption by AGC, WMS shall remain liable for the
obligations of AGC under this Agreement so long as an Early Termination Event
shall not have occurred.
10. MISCELLANEOUS.
10.1 This Agreement is personal to GTIS as one party and WMS as the other
party. Neither this Agreement nor any party's rights under it may be assigned,
in whole or in part, nor may its obligations be delegated, in whole or in part,
to any person or party without the prior written consent of the other party,
except that any party may assign its rights and delegate obligations to any of
its direct or indirect wholly-owned subsidiaries or affiliates or to any
person, firm or corporation owning or acquiring all or substantially all of the
stock or assets of that party, as long as both the assignee and the assignor
remain fully liable for assignor's obligations hereunder. After the Effective
Date, in connection with any Early Termination Event WMS and AGC shall obtain
the assumption by the purchaser or transferee of all covenants, obligations and
duties undertaken by the seller pursuant to the terms of this Agreement,
including its obligations with respect to Games and the intellectual property
from which they are derived. This Agreement shall bind the parties, their
successors and permitted assignees and delegees. WMS, as one party, and GTIS,
as the other party, are each jointly and severally liable for their respective
obligations under the terms of this Agreement.
10.2 The entire understanding between the parties hereto relating to the
subject matter hereof is contained herein. This Agreement cannot be changed,
modified, amended or terminated except by an instrument in writing executed by
the parties hereto.
10.3 No waiver, modification or cancellation of any term or condition
30
<PAGE> 31
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 no waiver shall be deemed
or construed to be a waiver of such terms or conditions for the future or any
subsequent breach thereof.
10.4 This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between WMS and GTIS, and neither
WMS nor GTIS 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.
10.5 This Agreement shall be governed by the laws of the State of Illinois
applicable to contracts made and to be wholly performed in the State of
Illinois.
10.6 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, either such provision will be deemed amended to conform to such
laws or regulations without materially altering the intention of the parties or
it shall be stricken and the remainder of this Agreement shall remain in full
force and effect.
10.7 This Agreement may be executed in counterparts each of which shall be
deemed an original and when taken together shall be deemed one and the same
document.
31
<PAGE> 32
10.8 In the event of conflicts between the provisions of this Agreement and the
Atari Home Computer Software Distribution and License Agreement, the provisions
of this Agreement shall prevail.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
WMS INDUSTRIES INC.
By: /s/ Neil D. Nicastro
--------------------------
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
--------------------------
32
<PAGE> 33
SCHEDULE 1
PROJECTS IN PROCESS
(ATARI PC GAMES)
<TABLE>
<CAPTION>
TITLE PLATFORM
- ----- --------
<S> <C>
Area 51 CD-ROM
Constructor Win '95/Mac-CD
Crisis Win '95
Dark Hermetic Order PC CD-ROM
Gretzky Hockey PC CD-ROM
Gretzky II Win '95
Primal Rage Mac-CD
RBI 96 IBM PC; CD-ROM
Return Fire CD-ROM
T-Mek PC; CD-ROM
</TABLE>
<PAGE> 34
EXHIBIT A
HOME COMPUTER SOFTWARE
DISTRIBUTION AND LICENSE AGREEMENT FOR ATARI GAMES
AGREEMENT made this ___ day of __________, 199__, by and between GT
INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices at 16 East
40th Street, New York, New York 10016 (herein called "Licensee") and ATARI
GAMES CORPORATION, a California corporation with offices at
(herein called "Licensor").
W I T N E S S E T H:
WHEREAS, Licensor owns or controls the rights in and to the Licensed
Property (which Licensed Property is hereinafter defined on Schedule "A"
attached hereto);
WHEREAS, Licensee is engaged in the business of manufacturing,
distributing and selling Computer Games (as hereinafter defined; such Computer
Games embodying the Licensed Property shall be hereinafter referred to as the
"Licensed Product"); and
WHEREAS, Licensee desires to use the Licensed Property in connection with
the manufacture, distribution and sale of the Licensed Product;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 The term "Computer Game" is herein defined as any Computer Software
designed to operate on IBM PC or Apple Macintosh or other compatible
multipurpose home computers, using floppy disks or CD-ROM or other stand alone
devices in all operating
<PAGE> 35
systems now known or hereafter developed or designated for use on the aforesaid
multipurpose home computers. Computer Games shall not include, among other
things, Computer Software designed to operate on dedicated home game systems
(e.g. Nintendo, Sega, Atari, Sony, etc. game platforms).
1.2 The term "Computer Software" or "Software" shall mean any computer
software containing substantially full and complete computer game code,
including the source code, the assembly code, the object code and such data
files and other files as are deemed necessary for the Licensed Product to
achieve its functional purpose, whereby data and visual images, with or without
sound, can be manipulated, communicated, reproduced or perceived with the aid
of a computer.
1.3 The term "Master Atari PC Agreement" shall mean the Master Option and
License Agreement for Atari PC Games dated March 27, 1996, between Licensee and
WMS Industries Inc.
1.4 The term "Licensed Product" shall have the meaning ascribed in the second
Whereas clause of this Agreement and, as the context may require, shall also
include books which communicate game playing tactics and/or strategies ("hint
books") specifically prepared for Computer Games which shall also be deemed
Licensed Products hereunder and shall be subject to all of the terms and
conditions, including without limitation the royalty provisions, hereof.
1.5 The term "Licensed Territory" shall have the meaning ascribed in Section 3
of this Agreement.
1.6 The term "Other Atari Home Computer Software Distribution and
<PAGE> 36
License Agreements" shall have the meaning ascribed in Schedule B.
1.7 The term "Projects in Process" shall have the meaning ascribed in Section
1.18 of the Master Atari PC Agreement.
1.8 The words "term of this Agreement" or "period of this Agreement" or "term
hereof" or "so long as this Agreement remains in force" or words of similar
connotation shall include the initial period of this Agreement and the period
of all renewals, extensions, substitutions or replacements of this Agreement.
1.9 The term "Third Party Fees and Royalties" shall mean all fees, royalties
and other participations of any kind or nature payable by Licensor to any third
party, including developers, licensors and others having rights in connection
with the exploitation of the Licensed Products. There shall be excluded from
the term "Third Party Fees and Royalties" as used herein (1) any recoupable
advances which have already been included in any development budget or
acquisition costs with respect to the Licensed Product which are to be shared
by Licensor and Licensee, in accordance with the terms of the Master Atari PC
Agreement and which have not yet been recouped; and (2) any fees or royalties
payable to employees or consultants by Licensor or its affiliates with respect
to the development of Licensed Product in house. If, with respect to Games
other than Projects in Process, Licensor or its affiliates acquires from a
third party in one transaction the rights to exploit a Game on multiple
platforms, unless Licensee shall otherwise agree, Licensor shall fund advances,
if any, paid to such third party, and any such advances shall be excluded from
the term Third Party Fees and Royalties; provided, however, that if such
advances are recoupable by Licensor or its affiliates from future royalties
payable to such third party, then Third Party Fees and Royalties shall
3
<PAGE> 37
include such royalties which would otherwise be payable to such third party
were it not for such right of recoupment.
Capitalized terms used, but not defined herein, shall have the meaning
ascribed to such terms in the Master Atari PC Agreement.
2. GRANT OF LICENSE.
2.1 Licensor hereby grants and Licensee hereby accepts, for the term of this
Agreement and subject to the terms hereinafter set forth, the exclusive license
to utilize the Licensed Property solely in connection with the manufacture,
distribution and sale of the Licensed Products in the Licensed Territory.
Licensee shall have the right to sublicense any of the rights granted to
Licensee hereunder with Licensor's prior written consent, which consent shall
not be unreasonably withheld or delayed. Without limiting the generality of
the foregoing, (a) Licensor shall not unreasonably withhold or delay its
consent to proposals by Licensee to sublicense its rights hereunder to third
party personal computer hardware or computer peripheral device manufacturers
for the purpose of bundling the Licensed Products together with such hardware
products for distribution only within the Licensed Territory and (b) Licensee
shall not have the right to sublicense its rights hereunder (and Licensor may
withhold its consent to any proposed sublicense) to any third party for the
purpose of distributing Licensed Products to mass market retailers in the
United States. It is understood that the term Licensed Products does not
include Computer Software designed for play on dedicated home video game
systems, such as those manufactured by Nintendo, Sega, Sony or Atari, or any
other medium of exploitation, including handheld games, over the air, cable or
fiber-optic transmission or any ancillary rights related thereto, all of which
remain the sole property of Licensor except as otherwise specifically
4
<PAGE> 38
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
provided below. No license is granted hereunder for the manufacture, sale or
distribution of Licensed Products to be used as premiums, in combination sales,
as giveaways or to be disposed of under similar methods of merchandising,
except only that Licensee shall have the right, subject to rights of third
parties in the Licensed Property, to distribute Licensed Products as premiums,
combination sales or giveaways solely (a) subject to Licensor's consent, which
shall not unreasonably be withheld or delayed, in connection with the sale and
distribution of other Computer Games licensed to Licensee by Licensor or its
affiliates under Other Atari Home Computer Software Distribution and License
Agreements, and (b) with respect to free or promotional goods in the quantities
set forth on Schedule B. [If Licensee's rights in Licensed Products are
derived under Section 2.5 of the Master Atari PC Agreement and relate to rights
acquired from third parties (as compared to rights to product developed
in-house by Licensor or its affiliates), add the following: Upon payment of
the * of the costs of the development as provided in Section 2.5 of the Master
Atari PC Agreement, Licensee shall be entitled to share in * of the net profits
derived by Licensee from the exploitation of ancillary merchandising rights to
the Licensed Product and Licensee shall be entitled to direct the exploitation
of such ancillary merchandising rights (but not hand held games) after
consultation and subject to Licensor's consent, which shall not unreasonably be
withheld or delayed. Licensee shall not be entitled to exploit or share in the
profits derived from any exploitation of games whether or not having the same
or similar title or play characteristics or using similar Computer Software, in
other game platforms, such as coin-operated games or dedicated home game
systems, or in any ancillary rights relating thereto. If ancillary
merchandising rights apply to or are derived from the
5
<PAGE> 39
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
exploitation of games which are designed to operate on multiple platforms
(irrespective of the chronological order in which such games are released for
such platforms), then the Licensor and Licensee will consult with each other to
determine a fair and appropriate method of exploiting the ancillary
merchandising rights and the respective participations of Licensor and Licensee
therein. For the purposes hereof, "net profits" shall be calculated by
subtracting from the actual monies received by Licensor or Licensee, as the
case may be, from the exploitation of the ancillary merchandising rights to the
Licensed Product (i) an amount equal to * of such receipts, representing
Licensor's or Licensee's allocation of overhead expenses, and (ii) all Third
Party Fees and Royalties payable by Licensor in connection therewith.
Licensor shall account to Licensee not less frequently than quarterly with
respect to the calculation and payment of its share of net profits as provided
above.]
2.2 This license does not include any rights to subsequent versions of the
Licensed Property (so-called "sequels" or "derivatives"), such rights being
retained by Licensor, except as the same are otherwise required to be offered
to Licensee under the Master Atari PC Agreement or as provided in the following
sentence. If any member of the Atari Group, as that term is defined in the
Master Atari PC Agreement, shall, within a period beginning not later than six
(6) months after Licensee has ceased selling a Licensed Product acquired under
Section 2.5 of the Master Atari PC Agreement in reasonable commercial
quantities, begin the development, in-house or through third-party developers,
of a sequel or derivative of such Licensed Product which utilizes more than *
of the same source code as such Licensed Product or substantially the same name
as such Licensed Product, then such sequel or
6
<PAGE> 40
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
derivative shall be offered to Licensee on the same terms and conditions as a
Game would have been offered to Licensee during the Option Period as that term
is defined in the Master Atari PC Agreement.
3. TERRITORY.
3.1 Licensee shall be entitled to manufacture, distribute and sell the
Licensed Products in all countries throughout the world, except (a) Japan and
(b) countries or locations which are excluded under the terms of any license
agreement between Licensor and any third party having rights to the Licensed
Property. The territory in which Licensee shall be entitled to manufacture,
sell and distribute the Licensed Products as specified above is herein referred
to as the "Licensed Territory."
[If this is a game license for T-Mek for PC; or Return Fire for PC; or
Constructor for PC and Mac, then Licensee shall have rights to a share of the
profits from the distribution of these games in Market Areas excluded under (b)
above, but for which Licensor will receive income under distribution agreements
existing as of the Effective Date. For these agreements, Licensor shall pay to
Licensee an amount equal to * of the proceeds received by Licensor from such
sublicensee after deducting (i) an amount equal to all Third Party Fees and
Royalties; (ii) an amount equal to the payment required to Warner Communications
Inc. as a result of this income; and (iii) in the case of sublicensees to whom
Licensor supplies the Licensed Product, Licensor's direct manufacturing and
shipping costs. The remaining income shall remain with Licensor and not be
paid to Licensee as Recoupable Amounts.]
7
<PAGE> 41
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
3.2 After the end of the Japan Territory Period, as defined in the letter
between WMS Industries Inc. and Licensee dated March 27, 1996 captioned, "Japan
Territory," Licensor shall have the exclusive right to license any of its
rights in Japan to third parties, subject to Licensee's prior written consent,
which consent shall not be unreasonably withheld or delayed. With respect to
the exploitation by Licensor of the Licensed Property in Japan, Licensee shall
be entitled to share in * of the net profits (as calculated in Section 2.1
above) derived by Licensor from its sale of Licensed Products in Japan.
Licensor shall account and pay over to Licensee, not less frequently than
quarterly, Licensee's share of net profits from the sale by Licensor of
Licensed Products in Japan.
4. TERM.
[Note: For Licenses granted under Section 2.3 of the Master Atari PC
Agreement, insert the following:
The license granted hereunder shall be effective
on the date hereof [which date, for Projects in
Process, shall be the earlier of the actual release
date or 60 days after delivery of the Technically
Acceptable Master Disk, as that term is defined in the
Master Atari PC Agreement, to Licensee] and shall
terminate on the earlier of (a) three years from the date
hereof, or (b) upon termination of Licensor's rights
obtained from third parties, unless sooner terminated
in accordance with the terms and conditions hereof;
provided, however, that (a) the license term shall be
deemed
8
<PAGE> 42
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
extended for an additional one year if Licensee has paid
royalties hereunder amounting to * or more in excess of * of
the amount of all Third Party Fees and Royalties payable in
respect of the exploitation of Licensed Products during the
third license year, and (b) the license term shall be deemed
further extended for a final additional one year if Licensee
has paid royalties hereunder amounting to * or more in
excess of * of the amount of all Third Party Fees and
Royalties payable in respect of the sale or other
exploitation of Licensed Products during the fourth license
year. For purposes hereof, royalties and Third Party Fees
and Royalties payable in respect of the sale or other
exploitation of Licensed Products during a license year
shall include amounts paid subsequent to the license year on
account of Licensed Products sold or otherwise exploited
during such license year, and shall not include amounts paid
during a license year on account of the sale or other
exploitation of Licensed Products during the prior license
year. Licensee shall be entitled, one time only, to make a
voluntary payment to Licensor in order to reach either (but
not both) of the * thresholds referred to above.]
[Note: For licenses granted under Section 2.4 of the Master Atari PC
Agreement, insert the following:
9
<PAGE> 43
The license granted hereunder shall be effective
on the date hereof and terminate on the termination of
Licensor's rights obtained from third parties,
provided however, that at any time prior to five years
from the earlier of the actual release date or 60 days
after delivery of the Technically Acceptable Master
Disk, as that term is defined in the Master Atari PC
Agreement, to Licensee, Licensor may notify Licensee
of its election to terminate the license, effective on
expiration of such five-year period, and in such event
Licensor shall pay to Licensee the portion of the
development costs paid by Licensee under Section 2.4
of the Master Atari PC Agreement.]
[Note: For licenses granted under Section 2.5 of the Master Atari PC
Agreement, insert the following:
The license granted hereunder shall be effective
on the date hereof and terminate on the termination of
Licensor's rights obtained from third parties.]
5. CONSIDERATION.
Licensee shall pay Licensor, with respect to the sale throughout the
Licensed Territory of the Licensed Products, a royalty as specified in Schedule
"B" annexed hereto on each unit of Licensed Product sold.
10
<PAGE> 44
6. ACCOUNTINGS.
6.1 Licensee agrees to forward to Licensor, within forty-five (45) days after
the end of each calendar quarter ("Royalty Period"), commencing with the first
calendar quarter during which any unit of the Licensed Product is sold, a
report, in reasonable detail and reported separately, by Marketing Area, of the
number of units and average wholesale price (by sales bracket, as provided in
Schedule B hereof) of the Licensed Products sold within such Royalty Period and
the royalty amount due for the sale of such units calculated in accordance with
Section 6.3 below and any recoupment claimed in accordance with Schedule B
annexed hereto, and Section 3 of the Master Atari PC Agreement. For purposes
hereof, the term "Marketing Area" shall include North America (as such term is
defined in the Master Option and License Agreement for Atari Home Video Games
between WMS Industries Inc. and Licensee, dated March 27, 1996 (the "Master
Atari Home Video Agreement"), and each of the other Marketing Areas designated
on Schedule C to Exhibit A of the Master Atari Home Video Agreement. Such report
shall also include a cumulative reconciliation of the number of units of
Licensed Products produced by Licensee to the number of units on hand. Licensee
agrees that accompanying each such report shall be payment, in U. S. funds, of
the amounts due to Licensor, if any, in respect of such Royalty Period in excess
of any permitted recoupment. Royalties calculated in foreign currencies shall be
converted to U. S. currency at the spot rate of exchange published in the Wall
Street Journal as of the last day of the Royalty Period. Such reports shall be
required to be submitted with respect to sales and distributions of the Licensed
Product whether or not any amounts are due under the terms hereof.
11
<PAGE> 45
6.2 Licensee agrees to keep accurate books of account and records with respect
to the Licensed Products, covering all sales, purchases and inventories of
Licensed Products and all royalty fees due under this Agreement at Licensee's
offices (or the offices of Licensee's affiliates) and to permit (or procure the
right for) Licensor at its own expense to have accounting professionals (which
may include Licensor's employees who have accounting degrees) inspect such
books of account and records of Licensee or its sublicensees during reasonable
business hours (but not during the first three weeks of a calendar quarter),
upon prior reasonable written notice, for the sole purpose of verifying the
reports to be provided hereunder. Such inspections, together with inspections
of Licensee's books of account and records pertaining to other Computer Games
licensed to Licensee by Licensor or its affiliates under Other Atari Home
Computer Software Distribution and License Agreements, shall occur no more
frequently than twice during any twelve (12) month period for each of the
Licensee's offices. Licensor's inspectors shall not be physically present in a
specific office of Licensee for more than 10 consecutive business days in
connection with any such inspection, provided that Licensee shall have supplied
all requested information and documentation and responded to questions on a
reasonably prompt basis. Licensee shall promptly furnish to Licensor copies of
any report which Licensee may produce as the result of any audit by Licensee of
the books of account and records of any sublicensee of Licensee. Licensor
shall keep any information obtained from any such inspections in confidence and
shall require that its accounting professionals do so as well. Licensee's
books relating to any particular royalty statement may be examined as aforesaid
only within two (2) years after the date rendered and Licensee shall have no
obligation to permit
12
<PAGE> 46
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Licensor to so examine such books relating to any particular royalty statement
more than once professionals reveals that Licensee has underpaid Licensor by an
aggregate of * or more with respect to the specific royalty statements which
are the subject of such audit, Licensee agrees that it shall also reimburse
Licensor for the reasonable documented costs for any such audit (including
traveling costs) up to the amount of the shortfall.
6.3 Royalties shall be paid on * of products sold by Licensee's point of sale
("POS") customers, less actual returns. With respect to shipments to non-POS
customers, not less than * of the shipment shall be deemed a sale for royalty
purposes on the date of shipment. Not less than * of the balance of the
shipment, less actual returns, shall be deemed a sale for royalty purposes six
(6) months following the date of shipment, and the balance of such shipment,
less actual returns not already counted, shall be deemed a sale for royalty
purposes twelve (12) months following the date of shipment. As used herein,
point of sale customers mean those customers who report actual sales by
selection number to Licensee via computer and scan their sales by UPC codes at
cash registers.
6.4 Licensor shall permit Licensee, at Licensee's own expense, to have an
independent certified public accountant inspect Licensor's books and records
with respect to the payment by Licensor of Third Party Fees and Royalties in
connection with the Licensed Products, during reasonable hours, upon prior
reasonable written notice and subject to such confidentiality requirements
(including the execution of appropriate confidentiality agreements)
13
<PAGE> 47
as Licensor may require, for the sole purpose of verifying payment and
calculation by Licensor of such Third Party Fees and Royalties. Licensor's
books and records may be examined by Licensee's representatives not more
frequently than twice in any twelve-month period and Licensee shall otherwise
have substantially the same rights as provided to Licensor under Section 6.2
above.
6.5 In circumstances where either party is obligated under this Agreement to
account to the other party in respect of any entitlement to the other party's
share in net profits from the exploitation of the Licensed Product, such party
shall account substantially in the same manner and in the same time frame as
provided in this Paragraph 6 above. The party to which such accounting is made
shall also have substantially the same rights as provided to Licensor in
Section 6.2.
6.6 Licensee recognizes that the timely submission of all reports required to
be submitted to Licensor pursuant to Section 6.1 hereof is critical for
Licensor to maintain good relations with its third party licensors as well as
for Licensor's own financial reporting requirements. Therefore, in addition to
any other rights and remedies of Licensor, if Licensee shall be late by more
than five (5) business days with respect to any report and/or royalty payment
required to be submitted to Licensor pursuant to Section 6.1 hereof (a "Late
Report"), then Licensee shall pay to Licensor a late charge ("Late Charge") at
a rate equal to the prime rate designated by Citibank N.A. on any royalties
covered by such Late Report that are actually payable to Licensor as provided
in Schedule B. Such Late Charge shall be computed from the 46th day following
the last day of the calendar quarter for which such Late Report is due until
the date actually paid. Licensor may elect to waive payment of any such
14
<PAGE> 48
Late Charge if Licensee shall have provided a reasonable estimate of royalties
due within fifteen (15) days following the end of the calendar quarter covered
by such Late Report.
6.7 At the time that the Licensor shall provide to Licensee notice of
availability of a Game pursuant to Section 2.4 or 2.5 of the Master Atari PC
Agreement, Licensor shall provide to Licensee sufficient data to enable
Licensee to calculate Third Party Fees and Royalties payable with respect to
each Licensed Product (without regard to any advances which may have been made
by Licensor). If Licensee is unable to calculate specific Third Party Fees and
Royalties from the data provided, Licensee may request assistance from Licensor
with respect thereto, and Licensor shall use its best efforts to respond within
seven (7) days from the date of such request, but Licensee shall provide all
sales and other data in its possession which are necessary for such
calculations.
7. QUALITY OF LICENSED PRODUCT.
7.1 The Licensed Products as manufactured, advertised, sold, distributed or
otherwise disposed of by Licensee under this Agreement shall be of a high
quality and shall be sold and distributed in packaging prescribed by Licensor
bearing Licensor's trademarks and trade names. Such packaging may indicate that
the Licensed Products are distributed by Licensee. Licensor shall have the
right to determine in its reasonable discretion whether the Licensed Product
meets Licensor's high standards of merchantability. Licensee agrees to furnish
Licensor free of cost for Licensor's written approval as to quality and style
(which approval shall not be unreasonably withheld), samples of the Licensed
Product, together with its proposed advertising, packaging and wrapping
materials, before its manufacture, sale or distribution (whichever first
occurs) and the Licensed Product shall not be sold or distributed
15
<PAGE> 49
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
by Licensee without such written approval.
7.2 If Licensor shall disapprove of any item submitted by Licensee for
approval hereunder, Licensor shall furnish at the time notice of disapproval is
given to Licensee an explanation of the reason(s) for such disapproval and
recommendations for suggested changes and Licensee shall resubmit such item
after changes have been made for Licensor's approval.
7.3 In the event that the quality of any Licensed Product approved by Licensor
shall become less than that approved by Licensor and Licensee shall fail to
raise the quality to the approved level within thirty (30) days after receiving
written notice from Licensor, the license granted under this Agreement for such
Licensed Product shall automatically terminate and shall remain terminated
until Licensor shall subsequently renew its approval of the Licensed product.
7.4 If disapproval is not received by Licensee within five (5) business days
after Licensor's receipt of the item submitted for approval, Licensor's
approval shall be deemed to have been given. Subsequent to final approval,
Licensor may request the Licensee once each quarter to send, without charge, a
reasonable number of production samples (but in any event not less than two (2)
copies of each language version) without payment of any royalty hereunder to
Licensor to ensure quality control. Should Licensor require additional samples
for any reason other than resale or any other commercial exploitation by
Licensor, Licensee shall be required to sell such samples to Licensor at its
cost (but without payment of any Third Party Fees and Royalties or other
royalty hereunder), but not more than * units of each Licensed Product.
16
<PAGE> 50
8. TRADEMARK AND COPYRIGHT, ETC.
8.1 "Notice" as used in this Section shall mean the following statutory
copyright notice and notice of registration or application for registration of
the licensed trademark:
_ _ _ _ (TM) or (R)
All Rights Reserved
C _ _ _ _ Licensed from [Atari(R) Games Corporation]
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensor shall advise Licensee prior to use
whether (TM) or (R) shall follow the words " _ _ _ _ ."
8.2 Licensee shall furnish to Licensor samples of all packaging in which the
Licensed Products are sold by Licensee and Licensor shall cause the copyright
in the packaging to be registered with the U.S. Copyright Office and recorded
with the U.S. Customs Dept. at Licensor's expense. Licensee shall print, stamp
or mold the Notice on all Licensed Products and on the front of each package or
container used in connection therewith, and Licensee shall print the Notice on
each label, advertisement and promotional release concerning any Licensed
Products, all in accordance with instructions from Licensor, providing,
however, that such notice shall be imprinted on the back of the package or
container used in connection therewith, displayed on the title screen of the
Licensed Product, and in the instruction booklet, if any, packaged with the
Licensed Product. Licensee agrees to execute and deliver to Licensor in such
form as Licensor may reasonably request all instruments necessary to effectuate
trademark protection or to record Licensee as a registered user of any
trademarks or to cancel such registration and if Licensee fails to execute such
instruments, Licensee hereby appoints
17
<PAGE> 51
Licensor Licensee's attorney-in-fact to do so on Licensee's behalf. Licensee
shall also furnish Licensor samples of all advertising or promotional materials
bearing the Notice for Licensor's approval.
8.3 Subject to the terms of this Agreement, Licensee acknowledges and agrees
that: All copyrights, trademarks and service marks and rights to same referred
to in this Section 8 in the name of and/or owned by Licensor shall be and remain
the sole and complete property of Licensor; that all such copyrights,
trademarks and service marks and rights to same in the name of or owned by any
copyright proprietor other than Licensor or Licensee shall be and remain the
sole and complete property of such copyright proprietor; that all trademarks
and service marks which, and/or the right to use which, arise out of the
license hereby granted to use the Licensed Property shall be and remain the
sole and complete property of Licensor; that Licensee shall not at any time
acquire or claim any right, title or interest of any nature whatsoever in any
such trademark or service mark by virtue of this Agreement or of Licensee's
uses thereof in connection with the Licensed Products; and that any right,
title or interest in or relating to any such trademark or service mark, which
comes into existence as a result of, or during the term of, the exercise by
Licensee of any right granted to it hereunder shall immediately vest in
Licensor.
8.4 Licensee agrees to assist Licensor at Licensor's expense to the extent
necessary in the procurement of any protection or to protect any of Licensor's
rights to the Licensed Property. Licensee shall notify Licensor in writing of
any infringements or imitations by others of the Licensed Property on articles
similar to those covered in this Agreement which may come to the Licensee's
attention. Licensor shall have the right to
18
<PAGE> 52
commence action to enforce its proprietary rights and prosecute any such
infringements, and Licensee agrees to fully cooperate, at Licensor's expense,
in any such action. However, Licensee shall not incur any such expense
reimbursable by Licensor without Licensor's express written approval and all
recoveries resulting from any such action shall belong solely to Licensor. In
the event Licensor declines to pursue any such action, Licensee may, with
Licensor's written permission, and subject to the consent of any third party
having rights in the Licensed Property, institute such an action, and Licensor,
at Licensee's expense, shall cooperate in such action instituted by Licensee
and all recoveries resulting from any such action shall belong solely to
Licensee. Licensor shall not unreasonably withhold or delay its permission to
enable Licensee to pursue an action (if Licensor shall decline to pursue such
action) against persons or entities reasonably believed by Licensee to be
counterfeiting or pirating Licensee's Licensed Products. Licensor shall not
unreasonably withhold or delay its permission to grant to any sublicensee who
requires it, at the time of entering into a sublicense, reasonable rights
(without Licensor's prior consent in each instance) to pursue persons
reasonably believed to be engaged in counterfeiting or piracy of the Licensee
Product.
8.5 During the term of this Agreement and thereafter, Licensee:
(a) will not challenge the ownership or rights of Licensor in and to the
Licensed Property or any copyright or trademark pertaining thereto developed by
or for Licensor, nor attack the validity of the license granted hereunder or
participate in any challenge thereto;
(b) will manufacture, sell and distribute the Licensed Products in compliance
with all applicable laws and governmental regulations in accordance with the
terms
19
<PAGE> 53
of this Agreement;
(c) will not except as set forth in this Agreement, either directly or
indirectly, use or display or authorize others to use or display, the
trademarks, copyrights or proprietary rights of Licensor in connection with any
advertising, assembly, manufacture, distribution, use, sale or lease of any
goods, other than in connection with the manufacture and sale of the Licensed
Products; and
(d) subject to Licensee's best business judgment Licensee will exercise
reasonable efforts to: (i) manufacture sufficient quantities of the Licensed
Product to meet the market demand for same; (ii) conduct advertising activities
to promote the sale of Licensed Product; and (iii) make any and all arrangements
necessary to accomplish such undertakings.
9. MATERIALS.
9.1 Notwithstanding anything contained herein to the contrary and subject to
the terms of this Agreement, all artwork, designs and computer software
embodying the Licensed Property, or any reproduction thereof, which are
designed, developed and/or created by Licensee hereunder (or any of its
sublicensees, affiliates or subsidiaries), shall be, and remain Licensor's sole
and exclusive property, inclusive of all copyrights and right to copyright
therein and thereto for the life of the copyright therein; provided that during
the term of this Agreement, Licensee shall have the exclusive right, license
and privilege (without any compensation to Licensor except as provided in
Section 5) to use all such above described materials in connection with its
exploitation, sale and distribution of the Licensed Products.
9.2 Licensor shall make available to Licensee, at Licensor's actual out
20
<PAGE> 54
of pocket cost, any artwork relating to the Licensed Property which Licensor
owns and which is reasonably available to Licensor for Licensee's use in
connection with the exploitation of the Licensed Property.
10. TRANSLATIONS.
In the event that Licensee shall reasonably require the text associated
with any Licensed Product to be translated into a language other than English,
Licensor shall, upon request, provide to Licensee the text files and the text
that appears in bit map files and printed copies of the script used for audio
components of the Licensed Product and Licensee shall furnish, at its own
expense, to Licensor a translation text thereof. Licensor shall then cause a
new Technically Acceptable Master Disk (as that term is defined in the Master
Atari PC Agreement) containing such translation to be encoded, at Licensor's
own expense, and delivered to Licensee.
11. REPRESENTATIONS AND WARRANTIES.
11.1 Licensor hereby represents and warrants that this Agreement has been duly
authorized, executed and delivered by Licensor; Licensor has the full power and
authority to enter into this Agreement and perform its obligations hereunder;
this Agreement constitutes the valid and binding obligation of Licensor,
enforceable in accordance with its terms; the making of this Agreement does not
violate any agreement, right or obligation existing between Licensor and any
other person, firm or corporation; and the Licensed Property, if used pursuant
to the license granted herein, will not infringe upon or violate any rights of
any third party.
11.2 Licensee hereby represents and warrants that this Agreement has
21
<PAGE> 55
been duly authorized, executed and delivered by Licensee; Licensee has the full
power and authority to enter into and perform its obligations hereunder; this
Agreement constitutes the valid and binding obligation of Licensee, enforceable
in accordance with its terms; the making of this Agreement does not violate any
agreement, right or obligation existing between Licensee and any other person,
firm or corporation; and its manufacture, advertisement, distribution and sale
of the Licensed Products will be in accordance with the terms of this Agreement
so as not to infringe upon or violate any rights of any third party.
12. INDEMNIFICATION.
12.1 Each party agrees to indemnify and hold the other (including officers,
directors, agents and employees of such party or its subsidiaries, affiliates
and sublicensees) harmless against any loss, damage, expense or cost (including
reasonable attorneys' fees) arising out of any claim, demand or suit or
judgment resulting from any breach of any warranty or representation set forth
in Section 11 above. Each party shall promptly inform the other of any such
claim, demand, suit or judgment.
12.2 In connection with any such claim, demand or suit referred to above, the
party so indemnifying (the "Indemnitor") agrees to defend, contest or otherwise
protect the indemnified party (the "Indemnitee") against any such suit, action,
investigation, claim or proceeding at the Indemnitor's own cost and expense.
The Indemnitee shall have the right, but not the obligation to participate, at
its own expense, in the defense thereof by counsel of its own choice. In the
event that the Indemnitor fails timely to defend, contest or otherwise protect
against any such suit, action, investigation, claim or proceeding, the
Indemnitee shall have the right to defend, contest or otherwise protect against
the same, and, upon ten (10) days'
22
<PAGE> 56
written notice to the Indemnitor, make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnitor, including without
limitation, reasonable attorneys' fees, disbursements and all reasonable
amounts applied as a result of such suit, action, investigation, claim or
proceeding or compromise or settlement thereof. The obligations hereunder
shall survive the termination or expiration of this Agreement.
12.3 Neither Licensor nor Licensee shall be liable for any incidental,
consequential or punitive damages to the other.
13. EVENTS OF DEFAULT AND TERMINATION.
Licensee shall be deemed to be in default of this Agreement in the event
either of the following occurs:
(a) Licensee fails to make any payment or furnish any statement in accordance
herewith, provided that Licensee shall have been given a first written notice
of such default and a period of at least 15 days in which to cure such default
and, if such default shall not have been cured within such period, Licensee
shall have been given a second written notice of such default and a further
period of at least 10 days in which to cure such default; or
(b) Licensee fails after thirty (30) days' written notice to Licensee to
comply with any other of Licensee's obligations hereunder.
14. EXPIRATION OR TERMINATION OF AGREEMENT.
Upon expiration or termination of this Agreement, all rights granted to
Licensee herein shall forthwith revert to Licensor with the following
consequences:
(a) All unpaid royalties shall be due and payable in accordance with Section
6.1 hereof.
23
<PAGE> 57
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
(b) Licensor shall thereafter be free to license others to use the Licensed
Property in connection with the manufacture, advertisement, distribution and
sale of items identical or similar to the Licensed Products in the Licensed
Territory.
(c) In the event of termination or expiration of this Agreement, other than a
termination by Licensor as a result of a material breach of this Agreement by
Licensee, Licensee may continue to sell for a period of one hundred eighty
(180) days after the effective date of termination all approved copies of the
units of the Licensed Product produced prior thereto.
Notwithstanding the expiration or termination of this Agreement, Licensor
will continue to account and pay over to Licensee, on a periodic basis not less
frequently than quarterly, * of the net profits (as calculated in Section 2.1
above) derived by Licensor from the exploitation of any ancillary merchandising
rights to the Licensed Products (as provided in Section 2.1 above) and * of the
net profits derived by Licensor from the exploitation of Licensed Products in
Japan, as provided in Section 3.2 above.
15. CONFIDENTIAL INFORMATION.
Each of the parties shall keep in confidence and not disclose to any third
party, without the written permission of the other party, the terms of this
Agreement and the proprietary information of the other party made known to it
under this Agreement. This requirement of confidentiality shall not apply to
information that is (a) in the public domain through no wrongful act of the
disclosing party; (b) rightfully received by the disclosing party from a third
party who is not bound by a restriction of nondisclosure; (c) already in the
24
<PAGE> 58
disclosing party's possession without restriction as to disclosure; or (d) is
required to be disclosed by applicable rules and regulations of government
agencies or judicial bodies. This obligation of confidentiality: (i) shall
survive termination of this Agreement and (ii) shall extend to any subcontractor
of either party and each party agrees to obtain from each such subcontractor a
written agreement to abide by the foregoing confidentiality requirements. Each
of the parties shall be entitled to seek injunctive or equitable relief to
prevent the breach or threatened breach by the other of the provisions of this
Section and to secure its enforcement.
16. NOTICES.
Any notice, consent, approval, request, waiver or statement to be given, made or
provided for under this Agreement shall be in writing and deemed to have been
duly given (i) by its delivery personally or by express mail; or (ii) five (5)
days after its being mailed, air express, registered or certified, return
receipt requested in a U.S. Post Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
25
<PAGE> 59
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
TO LICENSOR: Atari Games Corporation
c/o WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
WITH A COPY TO: Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
WITH A COPY TO: Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 782-1964
or such other address as either party may designate by notice given as
aforesaid.
17. MISCELLANEOUS.
17.1 This Agreement is personal to Licensee as one party and Licensor as the
other party. Neither this Agreement nor any party's rights under it may be
assigned, in whole or in part, nor may Licensee's or Licensor's rights or
obligations hereunder be delegated, in whole or in part, to any person or party
without the prior written consent of the other party, except that any party may
assign its rights and delegate obligations to any of its direct or indirect
27
<PAGE> 60
wholly-owned subsidiaries or affiliates or to any person, firm or corporation
owning or acquiring all or substantially all of the stock or assets of that
party, as long as that party remains fully liable for its obligations
hereunder. Any sale of not less than 50.1% of the stock or assets of Licensor
shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by the seller pursuant to the
terms of this Agreement, including its obligations with respect to Games and
the intellectual property from which they are derived. This Agreement shall
bind the parties, their successors and permitted assignees and delegees.
Licensor as one party, and Licensee as the other party, are each liable for
their respective obligations under the terms of this Agreement.
17.2 The entire understanding between the parties hereto relating to the
subject matter hereof is contained herein. This Agreement cannot be changed,
modified, amended or terminated except by an instrument in writing executed by
the parties hereto.
17.3 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 no waiver shall be deemed or
construed to be a waiver of such terms or conditions for the future or any
subsequent breach thereof.
17.4 This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between Licensor and Licensee, and
neither Licensor nor Licensee 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.
27
<PAGE> 61
17.5 This Agreement shall be governed by the laws of the State of Illinois
applicable to contracts made and to be wholly performed in the State of
Illinois.
17.6 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, either such provision will be deemed amended to conform to such
laws or regulations without materially altering the intention of the parties or
it shall be stricken and the remainder of this Agreement shall remain in full
force and effect.
17.7 This Agreement may be executed in counterparts each of which shall be
deemed an original and when taken together shall be deemed one and the same
document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATARI GAMES CORPORATION
By:
----------------------------
GT INTERACTIVE SOFTWARE CORP.
By:
---------------------------
28
<PAGE> 62
SCHEDULE A
[Insert description of Licensed Property]
<PAGE> 63
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
SCHEDULE B
ROYALTIES
Licensee shall pay royalties in an amount equal to the following
percentages of the net wholesale sales price of a Unit sold and not returned:
Net Wholesale Sales Price Royalty %
- ------------------------- ---------
* or greater *
* *
* *
* *
* *
* *
* *
* *
At Net Wholesale Sales Prices, as hereafter defined, between $0.01 and * the
above percentages shall be prorated based upon the next highest and next lowest
royalty percentage. For example, at a Net Wholesale Sales Price of *, the
royalty percentage shall be *. Notwithstanding the above, if the Licensed
Products cost * or more to develop or acquire ("Premium Products"), the minimum
per unit royalty for such Premium Products shall be calculated as follows: the
minimum per unit royalty during the six-month period commencing on the date on
which the Premium Product was First Released shall be an amount equal to * of
the product of (1) the Net Wholesale Sales Price of such Premium Product as of
the date of release multiplied by (2) the royalty percentage which corresponds
to such Net Wholesale Sales Price on the table set forth above (prorated as
appropriate). Thereafter, there shall be no further minimum per unit royalty.
The foregoing minimum per unit royalty provision shall not apply to so-called
"hint books" as to which there shall be no minimum royalty.
"Net Wholesale Sales Price" shall be that price invoiced by Licensee to its
customers, less any price discounts, rebates or credits granted at the time of
sale and taxes invoiced to customers (including VAT). No deduction shall be
made for bad debts or other uncollected amounts, advertising allowances,
including cooperative advertising, or any other costs incurred in
<PAGE> 64
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
manufacturing, selling or distributing the Licensed Products. In the event
that Licensee's experience with respect to bad debts and uncollectible amounts
during any calendar year in respect of sales of Licensed Products under this
Agreement and all Other Atari Home Computer Software Distribution and License
Agreements entered into between Licensor and its affiliates and Licensee under
the Master Atari PC Agreement, shall exceed * of Licensee's aggregate net sales
of Licensed Products under this Agreement and all such Other Atari Home
Computer Software Distribution and License Agreements during such calendar year
("Excess Bad Debts"), then Licensee shall be entitled to receive a credit
against royalties payable under this Agreement or any Other Atari Home Computer
Software Distribution and License Agreement determined as follows: the average
of the weighted Net Wholesale Sales Prices of all Licensed Products sold under
this Agreement and all Other Atari Home Computer Software Distribution and
License Agreements during such calendar year shall be determined, and the
royalty percentage which corresponds thereto in the table above (prorated as
appropriate) shall be multiplied by the amount of Excess Bad Debts for such
calendar year to determine the amount of such credit.
Royalties for "direct response sales" shall be calculated by multiplying * of
the royalty percentages set forth above (prorated as appropriate) times
Licensor's net receipts from such sales and, for purposes of determining the
applicable royalty percentages in the table set forth above, the amount of such
net receipts shall be substituted for "Net Wholesale Sales Price." The minimum
per unit royalty shall be * of the minimum per unit royalty applicable to sales
other than "direct response sales." Direct response sales shall refer to sales
made directly to consumers other than from a fixed retail location and shall
include catalogue sales, direct mail, print and television sales. Licensee's
net receipts from direct response sales shall be based upon actual monies
received, less amounts separately paid by purchasers as sales taxes and
shipping and handling charges.
Where Licensor has acquired from a third party a Licensed Property in
connection with which Third Party Fees and Royalties amounting to * or more of
Licensee's estimated Net Wholesale Sales Price are payable, Licensee may elect,
at the time it elects to accept the Licensed Product under the Master Atari PC
Agreement, to pay a substitute royalty ("Substitute Royalty") therefor, which
will reduce only the highest royalty based upon the Net Wholesale Sales Price
of the Licensed Product otherwise payable pursuant to the royalty table
included in this Schedule "B." For example, if the Substitute Royalty for a
Licensed Product is *, this would apply to units sold at Net Wholesale Sales
Prices of * and above; for lower Net Wholesale Sales Prices, the royalty
percentages and corresponding Net Wholesale Sales Prices reflected in the
royalty table would not be changed, except that the royalty percentage may not
exceed the amount of the Substitute Royalty.
The Substitute Royalty shall be computed by comparing the gross profit of
Licensor (i.e., royalty earned, less * Third Party Fees and Royalties, less *
of Shared Institutional Advertising, as such term is hereinafter defined) to
the gross profit of Licensee (i.e., Net Wholesale Sales Price, less
2
<PAGE> 65
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
royalty payable to Licensor, less * Third Party Fees and Royalties, less
product manufacturing cost, less * of Shared Institutional Advertising, less *
of Net Wholesale Sales Price (equivalent to Licensee's operating costs,
excluding overhead)); and determining the royalty percentage that would yield
the same gross profit for both Licensor and Licensee. The computation of the
Substitute Royalty for any year shall be adjusted following the end of such
year for the prior year to reflect changes in all of the components set forth
above, except for the * figure referenced above, during such prior year and any
increase or decrease in the Substitute Royalty resulting from such adjustment
shall be reflected on the royalty statement for the first Royalty Period of the
following year.
Where the Licensed Property (whether acquired from a third party or developed
by Licensor or any of its affiliates in house) has not been embodied in a
coin-operated video or pinball game, whether distributed by Licensor or any
entity which at any time was an affiliate or a member of the Atari Group, or
will not be embodied in a coin-operated video or pinball game distributed
within 60 days from the release of the Licensed Product, institutional
advertising costs (i.e., radio, television and print advertising to the general
public), will be shared equally ("Shared Institutional Advertising") by
Licensee and Licensor, provided that (a) the portion of the Shared
Institutional Advertising costs to be borne by Licensor shall not exceed * of
the Net Wholesale Sales Price of the Licensed Product, and shall only be
payable in that portion of the Licensed Territory in which Licensee itself (and
not its sublicensees) actually pays for institutional advertising costs and (b)
all such Shared Institutional Advertising costs and budgets therefor shall have
been previously approved in writing by Licensor. Licensee at its own cost and
expense shall be solely responsible for all in store and cooperative
advertising costs associated with the sale of Licensed Products in the Licensed
Territory.
Anything in the foregoing paragraphs to the contrary notwithstanding, where the
Licensed Property has not been embodied in a coin-operated video or pinball
game, whether distributed by Licensor or any entity which at any time was or is
an affiliate of any member of the WMS Group or the Atari Group, Licensee may
elect to pay an alternative royalty therefor. The alternative royalty shall
equal the sum of the royalty percentage payable in accordance with the table
set forth in Schedule B plus the Licensee's share of Third Party Fees and
Royalties, but in no event shall the alternative royalty exceed * of the actual
Net Wholesale Sales Price of the Licensed Product; provided, however, that
anything in the foregoing paragraphs or this paragraph to the contrary
notwithstanding, under no circumstances shall royalties, whether regular
royalties, Substitute Royalties or alternative royalties, be less than * of the
Third Party Fees and Royalties payable with respect to the sale of Licensed
Products.
See Section 2.15 of the Master Atari PC Agreement with respect to the amounts
of royalties payable for Licensed Products described therein.
ADJUSTMENTS TO ROYALTIES
3
<PAGE> 66
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Anything above to the contrary notwithstanding:
1. If Licensor is obligated to pay any Third Party Fees and Royalties with
respect to the sale of Licensed Products, the per unit royalties to be paid by
Licensee to Licensor with respect to such Licensed Products shall be equal to *
of all such Third Party Fees and Royalties, plus the greater of (a) the royalty
otherwise payable to Licensor as provided above and (b) the other * of such
Third Party Fees and Royalties. In no event shall the per unit royalty on the
sale of Licensed Products be less than * of such Third Party Fees and
Royalties.
2. In cases where Licensed Products are sold by sublicensees under
sublicenses granted by Licensee in accordance with the provisions of the Master
Atari PC Agreement, royalties shall be payable by Licensee to Licensor
hereunder equal to the sum of (a) an amount equal to all Third Party Fees and
Royalties payable with respect to the sale of such Licensed Products, plus (b)
* of the net proceeds received by Licensee from such non-affiliated third party
sublicensee after deducting (i) a fee to Licensee equal to * of such net
proceeds, (ii) an amount equal to all Third Party Fees and Royalties, and,
(iii) in the case of non-affiliated third party sublicensees to whom Licensee
supplies the Licensed Product, Licensee's direct manufacturing and shipping
costs. Revenues from bundling shall be shared in the same manner as revenues
from sublicenses; provided, however, that if Licensee is also the manufacturer
of products for bundling, the fee to Licensee shall equal * rather than * of
net proceeds. In no event shall the per unit royalty be less than * of such
Third Party Fees and Royalties.
3. Until Licensee shall have fully recouped the * Minimum Guaranteed
Advance Royalty, as provided below, Licensor shall pay over to Licensee
Licensor's share of net profits from the exploitation of the Licensed Product
in Japan and in any other territories in which Licensor is entitled to exploit
the Licensed Products or ancillary merchandising rights thereto under this
Agreement except for territories not available to Licensee by reason of third
party agreements existing on the Effective Date, and all amounts so paid over
to Licensee shall be deemed to constitute additional Recoupable Amounts (as
that term is used below) under this Agreement.
RECOUPMENT.
Licensee shall be entitled to apply the aggregate amount by which (a) Royalties
applied or accrued under this Agreement exceed (b) * of the amount of any Third
Party Fees and Royalties payable by Licensor to parties having rights with
respect to the sale of Licensed Products (the "Recoupable Amount") to recoup
the * Dollars Minimum Guaranteed Advance Royalty paid by Licensee to WMS
Industries Inc. pursuant to Section 3 of the Master Atari PC Agreement and the
Master Atari Home Video Agreement (as that term is defined in the Master Atari
PC Agreement), until such Recoupable Amount together with Recoupable Amounts
applied or accrued by Licensee under any Other Atari Home Computer Software
Distribution and License
4
<PAGE> 67
THE INFORMATION BELOW MARKED BY * HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND HAS BEEN FILED SEPARATELY WITH THE COMMISSION.
Agreement entered into by Licensee pursuant to the Master Atari PC Agreement
("Other Home Software Distribution and License Agreements") and under any Atari
Home Video Distribution and License Agreement entered into by Licensee pursuant
to the Master Atari Home Video Agreement (and to the extent applicable amounts
which may be recouped against such Minimum Guaranteed Advance Royalty pursuant
to the GTIS Master Home Video Agreement and the GTIS Master PC Agreement) equal
* Dollars; provided, however, that (a) to the extent that the aggregate of all
Recoupable Amounts applied or accrued under this Agreement and the Other Atari
Home Computer Software Distribution and License Agreements and under any Atari
Home Video Distribution and License Agreement entered into pursuant to the
Master Atari Home Video Agreement between the Effective Date and one year after
the Effective Date exceed the installment of the Minimum Guaranteed Advance
Royalty paid on the Effective Date, such excess shall be paid to WMS Industries
Inc. and applied in reduction of the installment of the Minimum Guaranteed
Advance Royalty payable on one year after the Effective Date under the Master
Atari PC Agreement and Master Atari Home Video Agreement.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
Licensee shall be permitted to distribute free and promotional goods without
the payment of any Third Party Fees and Royalties or other royalties thereon,
subject to the provisions of Section 1 above and within the following
territorial and quantity limits:
United States and Canada: * units in the aggregate
United Kingdom,
Germany, Scandinavia,
Benelux, Italy, Spain,
Australia, and Japan: * units per country
Other Countries: * units per country
No royalties shall be payable by Licensee to Licensor in excess of any Third
Party Fees and Royalties in connection with the sale by Licensee of
"close-outs." For purposes hereof, "close-outs" shall mean any Licensed
Products that are sold for a price no greater than the sum of direct
manufacturing and shipping costs plus any Third Party Fees and Royalties.
5
<PAGE> 68
WMS Industries Inc.
340l North California Avenue
Chicago, IL 60618
March 27, 1996
GT Interactive Software Corp.
16 East 40th Street
New York, NY 10016
Re: Japan Territory
Gentlemen:
Reference is made to the GTIS Master Option and License
Agreement dated December 28, 1994, as amended (the "GTIS Master PC Agreement"),
the GTIS Master Option and License Agreement (Home Video Games) dated March 31,
1995, as amended (the "GTIS Master Home Video Agreement"), the Master Option and
License Agreement for Atari PC Games dated March 27, 1996 (the "Master Atari PC
Agreement") and the Master Option and License Agreement for Atari Home Video
Games dated March 27, 1996 )(the "Master Atari Home Video Agreement"). The GTIS
Master PC Agreement, the GTIS Master Home Video Agreement, the Master Atari PC
Agreement and the Master Atari Home Video Agreement are collectively referred to
herein as the "Master Agreements."
This will confirm our agreement that during the "Japan
Territory Period," as that term is defined below, the Licensed Territory, as
that term is defined in the license and distribution agreements annexed as
Exhibit A to the Master Agreements, shall not exclude Japan. The Japan Territory
Period shall mean the period beginning on the Effective Date, as that term is
defined in the Master Atari Home Video Agreement, and ending on the date which
is the later to occur of (i) two years after the Effective Date, or (ii) one
year after either GTIS or WMS gives written notice to the other of its decision
to terminate the Japan Territory Period; provided, however, that if such notice
is given by WMS, the termination shall not be effective unless on the designated
termination date WMS directly or indirectly owns not less than 49% of an entity
which (i) is or intends to become a distributor of home video or personal
computer games in Japan, and (ii) conducts or intends to conduct meaningful
business in Japan. If such entity does not intend to distribute both home video
and personal computer games in Japan, then the
<PAGE> 69
aforesaid termination shall be effective only as to the category of games (home
video games or personal computer games) which such entity does intend to
distribute. During the Japan Territory Period, Japan shall be deemed added to
Schedule C to the Master Atari Home Video Agreement and the GTIS Master Home
Video Agreement and shall be deemed designated as a Key Marketing Area as such
term is defined therein. In addition, anything in this letter, the Master
Agreements or licenses issued pursuant to the Master Agreements to the contrary
notwithstanding, GTIS shall pay to the WMS Group and shall have no right to
recoup any Royalties attributable to Licensed Products sold in Japan during the
Japan Territory Period pursuant to the licenses issued under the GTIS Master
Home Video Agreement.
After termination of the Japan Territory Period, (i) licenses
entered into during the Japan Territory Period and still in effect on the date
of termination of such period shall continue for their term, and (ii) with
respect to licenses entered into after the Japan Territory Period, the Licensed
Territory shall exclude Japan, and the terms of applicable Master Agreements and
related license agreements shall apply.
Please indicate your agreement to the foregoing by signing
this letter in the place provided below.
Very truly yours,
WMS INDUSTRIES INC.
By: /s/ Neil Nicastro
---------------------
Accepted and Agreed To:
GT INTERACTIVE SOFTWARE CORP.
By: /s/ Ronald Chaimowitz
- -----------------------------
