SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 29,
1997
GAMETEK, INC.
_____________________________________________________________
(Exact name of Registrant as specified in its Charter)
DELAWARE 0-23168 65-0007710
________________ ________________________ _________________
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of I.D. Number)
incorporation)
Three Harbor Drive
Suite 110
Sausalito, California 94965
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code:
(415) 289-0220
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Item 2. Acquisition or Disposition of Assets.
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On July 29, 1997, Registrant sold all of the stock of two
subsidiaries, Gametek (UK), Inc. and Alternative Reality
Technologies, Inc., and certain related assets to Take Two
Interactive Software, Inc. ("Take Two"), a developer,
publisher and distributor of entertainment software that
recently completed its initial public offering.
Simultaneously, Registrant and Take Two entered into
distribution arrangements, under which Take Two will
distribute Registrant's new Wheel of Fortune and Jeopardy!
titles for Nintendo's N64 game platform, as well as four of
the Registrant's existing GameBoy software titles.
The consideration received in connection with the stock and
asset sale consisted of 381,553 shares of Take Two's common
stock having a market value on the issuance date of
approximately $3,000,000, $50,000 in cash, a two year note
in the principal amount of $500,000, and a short term note
in the principal amount of $200,000.
Registrant has previously published and/or distributed a
number of software titles developed by Take Two.
On the same date that it consummated the sale to Take Two,
Registrant compromised its outstanding debt of
approximately $1,600,000 in principal and accrued interest
owed to Ocean Bank by causing Take Two to issue directly to
Ocean Bank (i) the $500,000 Take Two note described above,
and (ii) 22,257 shares of the Take Two common stock issued
by Take Two in such sale. As a result, the Registrant
retained from the proceeds of the stock and asset sale
359,296 shares of Take Two common stock, $50,000 cash and
the $200,000 short term note described above.
Upon closing of the sale to Take Two, Kelly G. Sumner
resigned as President, Chief Operating Officer and a
director of Registrant and its subsidiaries, to head Take
Two's European operations. J. Thomas Reuterdahl, Vice
President of Product Development, was appointed to succeed
Mr. Sumner as Chief Operating Officer and as a director of
the Registrant.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
- ----------------------------------------------
Listed below are the financial statements, pro
forma financial information and exhibits, if any, filed as
part of this report.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits:
Number Exhibit Titles Page
10.1 Stock and Asset Purchase
Agreement dated July 29, 1997
among Registrant, Gametek (UK)
Limited ("GTUK"), Alternative
Reality Technologies Inc.
("ART") and Take Two
Interactive Software, Inc.
("Take Two") . . . . . . . . . . . . . . . . .5
10.2 Letter Agreement dated July 28,
1997 between Registrant and
affiliates and Ocean Bank. . . . . . . . . . 35
10.3 Distribution Agreement dated
July 29, 1997 between
Registrant and Take Two
relating to GameBoy titles . . . . . . . . . 41
10.4** Distribution Agreement dated
July 29, 1997 between
Registration and Take Two
relating to N64 titles . . . . . . . . . . . 60
________________________________________________________
** Confidential treatment has been requested for certain
information contained in this Exhibit.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
GAMETEK, INC.
(Registrant)
By: /s/ J. Thomas Reuterdahl
-------------------------------
J. Thomas Reuterdahl,
Vice President and
Chief Operating Officer
(Signature)
Dated: August 13, 1997
EXHIBIT 10.1
ASSET AND STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of the 29th day of July 1997,
by and among GameTek (UK) Limited ("GameTek"), a United
Kingdom corporation, Alternative Reality Technologies, Inc.
("ART"), a Florida corporation (GameTek and ART are
sometimes hereinafter collectively referred to as
"Sellers"), GameTek (FL), Inc., a Florida corporation (the
"Stockholder") and Take Two Interactive Software, Inc.
("Buyer").
W I T N E S S E T H :
WHEREAS, the Stockholder is the owner of all of
the issued and outstanding Common Stock of the Sellers; and
WHEREAS, the Stockholder is also the owner of
certain assets which the Buyer wishes to purchase; and
WHEREAS, the Sellers are engaged in the business
of creating, developing and/or distributing computer
software games (the "Business"); and
WHEREAS, the Stockholder wishes to sell to Buyer,
and Buyer wishes to purchase from Stockholder, all of
Stockholder's right, title and interest in (i) PC CD
software games known as Dark Colony, Quarantine and Road
Warrior (the "Existing Titles"), (ii) the PC CD software
games known as Guardians of Justice, the Reap and all other
software programs and PC CD games being developed in
GameTek's office (the "UK Titles") and (iii) all of the
outstanding capital stock of the Sellers (the "Stock").
WHEREAS, simultaneously herewith Buyer and
Stockholder are entering into a distribution agreement (the
"Gameboy Distribution Agreement"), a copy of which is
annexed hereto as Exhibit A pursuant to which Buyer shall
receive the European distribution rights to all Gameboy
Titles currently published by the Stockholder (the "Gameboy
Titles").
WHEREAS, simultaneously herewith, Buyer and
Stockholder are entering into a distribution agreement (the
"Jeopardy Distribution Agreement"), a copy of which is
annexed hereto as Exhibit A-1 (the Jeopardy Distribution
Agreement and the Gameboy Distribution Agreement are
hereinafter sometimes referred to collectively as the
"Distribution Agreements").
NOW, THEREFORE, in consideration of and in
reliance upon the covenants, conditions, representations and
warranties herein contained, the parties hereto hereby agree
as follows:
1. Purchase and Sale Agreement.
1.1 Agreement of Purchase and Sale. Subject
to the terms and conditions set forth in this Agreement and
in reliance upon the representations, warranties, covenants
and conditions herein contained, Stockholder is (a) selling,
conveying, assigning, transferring and delivering to Buyer,
and Buyer is purchasing from Stockholder, the Purchased
Assets (as defined in subparagraph 1.2 hereof), free and
clear of any and all liens, claims, charges or encumbrances
of any nature whatsoever other than those created by third
party agreements set forth on Schedule 1.3 and those that
are reflected on or referred to in the financial statements
identified in section 4.6 hereof (collectively, the
"Permitted Encumbrances").
1.2 Purchased Assets. As used in this
Agreement, the term "Purchased Assets" means (i) all of
Stockholder's rights, title and interest in the Existing
Titles, and (ii) all of Stockholder's rights, title and
interest in the UK Titles; (the Existing Titles, and the UK
Titles are sometimes hereinafter collectively referred to as
the "Software Assets"); and (iii) the Stock. Schedule 1.2
contains a complete list of all Existing Titles and all UK
Titles. The transfer of the Existing Titles and the UK
Titles (and the term "Purchased Assets") includes all of
Stockholder's right, title and interest in all forms of
expression and media, including but not limited to the
source code, object code, flowcharts, block diagrams, and
all related documentation; and all trade secrets, know-how,
inventions (whether or not patentable), proprietary rights
and intellectual property contained therein, including,
without limitation, all copyrights, trademarks and patents
and all applications therefor, goodwill, all right, title,
interest and benefit of Stockholder in, to, and under, and
subject to, all agreements, contracts and licenses entered
into by Stockholder, or having Stockholder as a beneficiary,
and pertaining to the Existing Title and UK Titles and all
System Documentation and End User Documentation (as
hereinafter defined).
1.3 Assumed Liabilities. Subject to the
terms and conditions set forth in this Agreement and in
reliance upon the representations, warranties, covenants and
conditions herein contained, Buyer is assuming, and shall
only assume (i) all obligations of Sellers, Stockholder
and/or the entities listed on Schedule 1.3 as Stockholder's
affiliates (the "Affiliates") under the third-party
agreements relating to the Existing Titles and the UK
Titles, all of which agreements are listed on Schedule 1.3
(the "Assumed Agreements") and (ii) all of the outstanding
liabilities of the Sellers (the assumed liabilities set
forth in (i) and (ii) above are collectively referred to
hereinafter as the "Assumed Liabilities"). All liabilities
and obligations which are not being assumed by Buyer
pursuant hereto are hereinafter collectively called the
"Retained Liabilities".
1.4 Purchase Price. The purchase price for
the Purchased Assets consists of the following: (a) $50,000,
(b) 406,553 shares (the "Stock Consideration") of the common
stock of the Buyer, (c) two unsecured promissory notes in
the principal amounts of $500,000 and $200,000, respectively
(the "Promissory Notes") of Buyer, in the form annexed
hereto as Exhibit B-1 and B-2, (d) the assumption by Buyer
of all of the Assumed Liabilities pursuant to the Assumption
and Assignment Agreement attached hereto as Exhibit C and
(e) the tax refund, if any, referred to in Section 3.7 (the
aggregate of (a), (b), (c), (d) and (e) is collectively
referred to hereinafter as the "Purchase Price").
2. Closing.
2.1 Closing Date. This Agreement shall be
executed, and the closing of the sale and purchase provided
for herein (the "Closing") shall take place at 10 a.m., New
York time, at the offices of Tenzer Greenblatt LLP, 405
Lexington Avenue, 23rd Floor, New York, New York 10174 on
the date hereof (such time and date of Closing being
hereinafter called the "Closing Date").
2.2 Action by Buyer. Simultaneously
herewith, Buyer is delivering or causing to be delivered to
Stockholder (in addition to the documents and instruments to
be delivered by it pursuant to paragraph 3 hereof), (a) on
account of the Purchase Price (i) $50,000, (ii) the
Promissory Notes, (iii) certificates representing the Stock
Consideration registered as directed by the Stockholder and
(b) an opinion of Tenzer Greenblatt LLP, counsel to the
Buyer, dated the Closing Date, in substantially the form
annexed hereto as Exhibit D and (c) the Assumption and
Assignment Agreement.
2.3 Action by Stockholder. Simultaneously
herewith, Stockholder is delivering to Buyer (in addition to
the documents and instruments to be delivered by it pursuant
to paragraph 3 hereof): (i) a duly executed Bill of Sale
and Assignment in substantially the form attached hereto as
Exhibit E with respect to the Software Assets, (ii) all
such patent, trademark, trade name and copyright assignments
(in the form attached hereto as Exhibit F), (iii) the
Distribution Agreements, (iv) an opinion of Ackerman, Levine
& Cullen, LLP, counsel for Stockholder and Sellers, dated
the Closing Date, in substantially the form of Exhibit G
hereto and (v) all third party consents and governmental and
administrative approvals, as are, in the opinion of Buyer,
necessary or appropriate in order to convey, transfer and
assign to and vest in Buyer good and marketable right, title
and interest in and to the Purchased Assets free and clear
of all liens, security interests, claims, charges and
encumbrances of any nature whatsoever, except for consents
or approvals required under any agreement set forth in
Schedule 1.3 and indicated thereon the Permitted
Encumbrances, and (vi) certificates representing the Stock
with stock powers duly executed in blank. Simultaneously
herewith, Stockholder is delivering (i) the entire inventory
of copies of the Existing Titles and the UK Titles in object
form, consisting of disks together with all improvements,
corrections, modifications, updates enhancements or other
changes; (2) a master copy of the software (in both source
and object code format of the Existing Titles and the UK
Titles), in a form suitable for copying (to the extent such
masters exist); and (3) all existing System Documentation
and User Documentation. System Documentation means all
documentation used in the development and updating of the
Existing and U.K. Titles, including but not limited to,
design or development specifications, error reports, and
related correspondence and memoranda. User Documentation
means the end-user instruction manual that usually
accompanies the Existing Titles and UK Titles instructing
end users in the use of the Existing Titles and UK Titles in
both printed and electronic form.
3. Additional Covenants.
3.1 Further Assurances. Stockholder hereby
agrees that it shall from time to time after the Closing
Date, at Buyer's sole cost and expense, take any and all
actions, and execute, acknowledge, deliver, file and/or
record any and all documents and instruments, as Buyer may
reasonably request, in order to more fully perfect the
rights which are intended to be granted to Buyer hereunder.
3.2 Payment of Taxes Upon Transfer of
Purchased Assets. Stockholder shall be responsible for, and
shall pay, any and all sales, use, purchase, transfer and
similar taxes, and any and all filing, recording,
registration and similar fees, arising out of the
transactions contemplated by this Agreement.
3.3 Survival of Representations and
Warranties. Each of the parties hereto hereby agrees that
all representations and warranties made by or on behalf of
it in this Agreement or in any document or instrument
delivered pursuant hereto shall survive the Closing Date and
the consummation of the transactions contemplated hereby for
a period of eighteen (18) months, provided, however, that
the representations and warranties set forth in Section 4.13
(taxes), Section 4.4 (authority) and Section 4.8 (assets
free and clear) shall continue until the expiration of the
applicable statute of limitations.
3.4 Books and Records. Stockholder shall,
for a period of at least three years following the Closing
Date, maintain and make available to Buyer and its
representatives for inspection and reproduction, during
regular business hours, all books and records relating to
Sellers, the Purchased Assets, the Business or the Assumed
Liabilities which are not included among the Purchased
Assets and which are retained by the Stockholder. Buyer
shall, for a period of at least three years following the
Closing Date, maintain and make available to Stockholder and
its representatives for inspection and reproduction, during
regular business hours upon reasonable notice, all books and
records relating to Sellers, which are included among the
Purchased Assets or delivered to or left in the possession
of Sellers, but only insofar as said books and records
relate to periods ending on or prior to the Closing Date.
3.5 Employment Agreement. Simultaneously
herewith, Kelly Sumner is delivering to GameTek an
Employment Agreement in the form annexed hereto as Exhibit
I.
3.6 Discharge of Liens. Stockholder or
Sellers have caused all liens, claims, charges and
encumbrances upon any of the Purchased Assets or any of the
assets of either Seller that are not reflected or referred
to in the latest financial statements referred to in Section
4.6 hereof or that did not arise after the date thereof in
the ordinary course of business, to be terminated or
otherwise discharged at or prior to the Closing other than
the Permitted Encumbrances.
3.7 Cancellation of Intercompany
Indebtedness. On or prior to the Closing Date, each of
Stockholder and any Affiliate shall cause all intercompany
indebtedness due from Sellers to Stockholder and any
Affiliate to be converted into equity. Any tax refunds due
to and received by either GameTek or ART in respect of
periods prior to the Closing Date which are not reflected on
the balance sheet of Sellers previously furnished to Buyer
shall be paid to Stockholder as an additional payment of
Purchase Price including, without limitation, the tax refund
of approximately 250,000 pounds sterling owed to GameTek in
respect of fiscal 1994 and fiscal 1995. Buyer, Sellers and
Stockholder shall cooperate with each other and use their
reasonable best efforts to obtain such refund and cause the
same to be paid to Stockholder promptly.
3.8 Retained Liabilities. Subsequent to the
Closing Date, Stockholder shall pay, discharge and perform
the Retained Liabilities in due course.
3.9 Registration Rights. Simultaneously
herewith, Buyer and Stockholder are executing and delivering
a registration rights agreement in substantially the form
annexed hereto as Exhibit J (the "Registration Rights
Agreement").
3.10 Certificate of Stockholder.
Simultaneously herewith, Stockholder is delivering a
certificate of the Secretary of Stockholder stating that the
sale of all of the Stock and the Purchased Assets has been
approved by the directors of Stockholder and annexing true
and correct copies of the minutes approving the execution
and delivery of the Agreement and the consummation of the
transactions contemplated thereby.
3.11 Certificate of Buyer. Simultaneously
herewith, Buyer is delivering a certificate by its Secretary
stating that the acquisition of the Purchased Assets and the
issuance of the Promissory Notes and Stock Consideration has
been approved by the shareholders of Buyer and annexing a
true and correct copy of the Buyer's minutes approving such
acquisition.
3.12 Use of Name. Promptly after the
execution hereof, and at its cost and expense, Buyer shall
change the corporate name of each of each of the Sellers and
GameTek Deutschland GmbH to a name bearing no resemblance to
either Alternative Reality Technologies, Inc., GameTek (UK)
Limited or GameTek Deutschland GmbH, the rights to which are
being retained by Stockholder; provided, however, that the
Buyer may continue to use the GameTek and ART names in
connection with the disposition of existing finished goods
inventory of games subject to existing purchase orders for
finished goods inventory.
3.13 Cooperation. Each of the parties
hereto hereby agrees to fully cooperate with the other
parties hereto in preparing and filing any notices,
applications, reports and other instruments and documents
which are required by, or which are desirable in the opinion
of any of the parties hereto, in respect of any statute,
rule, regulation or order of any governmental or
administrative body in connection with the transactions
contemplated hereby, including, without limitation, the
execution and filing of any financial reports or tax returns
which are delinquent as of the Closing Date.
4. Representations and Warranties as to Seller
and Stockholder. Sellers and the Stockholder hereby
severally and not jointly represent and warrant to Buyer as
follows:
4.1 Organization, Standing and Power. Each
of the Stockholder, GameTek and ART is a corporation duly
organized, validly existing and in good standing under the
laws of Florida, the United Kingdom and Florida,
respectively, with full corporate power and authority to
own, lease and operate its respective properties and to
carry on its respective business as presently conducted by
it. There are no states or jurisdictions in which the
character and location of any of the properties owned or
leased by either of GameTek or ART, or the conduct of its
respective business, makes it necessary for it to qualify to
do business as a foreign corporation and where it has not so
qualified, except for those jurisdictions in which the
failure to so qualify would not have a materially adverse
effect on the business or operations of such entity. Copies
of the Certificate of Incorporation of each of Stockholder,
GameTek and ART and all amendments thereof, and of the By-laws of each
of Stockholder, GameTek and ART, as amended to
date, have been furnished to Buyer and are complete and
correct. GameTek's and ART's respective minute books
heretofore exhibited to Buyer contain complete and accurate
records of all meetings and other corporate actions of their
respective stockholders and Board of Directors (including
committees of its Board of Directors).
4.2 Capitalization. The authorized capital
stock of GameTek consists of 1,677,756 shares of Common
Stock, par value one pound sterling per share, of which
1,050,601 shares are issued and outstanding. The authorized
capital stock of ART consists of 200 shares of Common
Stock, par value $0.01 per share, of which 100 shares are
issued and outstanding. Stockholder owns all of the Stock
of the Sellers and has good and valid title to the Stock,
free and clear of any and all liens, claims, charges and
encumbrances of any nature whatsoever. The Stock has not
been assigned, transferred, hypothecated or otherwise
encumbered. There are no outstanding options, warrants,
rights, calls, commitments, conversion rights, puts, plans
or other agreements of any character to which Stockholder or
the Sellers are a party or otherwise bound which provide for
the acquisition or disposition of any of the Stock or any of
the securities of either Seller. All of the Stock has been
duly and validly issued and is fully paid and nonassessable.
4.3 Interests in Other Entities. Neither
GameTek nor ART (A) own, directly or indirectly, of record
or beneficially, any shares of voting stock or other equity
securities of any other corporation except that GameTek
Deutschland GmbH is a wholly owned subsidiary of GameTek,
(B) have any ownership interest, direct or indirect, of
record or beneficially, in any unincorporated entity, or (C)
have any obligation, direct or indirect, present or
contingent, (1) to purchase or subscribe for any interest
in, advance or loan monies to, or in any way make
investments in, any person or entity, or (2) to share any
profits or capital investments or both other than those set
forth on Schedule 4.3 annexed hereto.
4.4 Authority. The execution and delivery
by Stockholder, GameTek and ART of this Agreement and of all
of the agreements to be executed and delivered by each of
them pursuant hereto (including, without limitation, the
Distribution Agreements), the performance by each of them of
its respective obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all
necessary corporate action on the part of Stockholder,
GameTek and ART (including, but not limited to, the
unanimous consent of their respective stockholders, if
required, and Boards of Directors) and each of Stockholder,
GameTek and ART has all necessary power with respect
thereto. This Agreement is, and when executed and delivered
by Stockholder and the Sellers (to the extent that they are
parties thereto) each of the other agreements to be
delivered by any or all of them pursuant hereto will be, the
valid and binding obligation of Stockholder, GameTek and ART
(to the extent that they are parties thereto) in accordance
with its terms.
4.5 Noncontravention. Neither the execution
and delivery by Stockholder and/or the Sellers of this
Agreement or of any agreement to be executed and delivered
by Stockholder and/or the Sellers pursuant hereto, nor the
consummation of any of the transactions contemplated hereby
or thereby, nor the performance by Stockholder or the
Sellers of their respective obligations, as the case may be,
hereunder or thereunder, will (nor with the giving of notice
or the lapse of time or both would) (a) conflict with or
result in a breach of any provision of the Certificate of
Incorporation or By-laws of the Stockholder or the Sellers,
or (b) except as set forth on Schedule 1.3, give rise to a
default, or any right of termination, cancellation or
acceleration, or otherwise be in conflict with or result in
a loss of contractual benefits to the Sellers or, with
respect to the UK Titles, the Existing Titles or the GameBoy
Titles (collectively the "Titles"), under any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or
obligation to which it is a party or by which the Sellers or
the Stockholder may be bound or to which the Titles may be
subject, or require any consent, approval or notice under
the terms of any such document or instrument, or (c) except
as set forth on Schedule 1.3, violate any order, writ,
injunction, decree, law, statute, rule or regulation of any
court or governmental authority which is applicable to
Stockholder with respect to the UK Titles, the Existing
Titles or the GameBoy Titles, or the Sellers, or (d) except
as set forth on Schedule 1.3, result in the creation or
imposition of any lien, claim, charge, restriction or
encumbrance upon any of the properties or assets of the
Sellers, or, with respect to the UK Titles, the Existing
Titles or the GameBoy Titles or (e) except as set forth on
Schedule 1.3, give any individual or entity a legally
enforceable claim against Buyer, Stockholder, Sellers or the
Stock.
4.6 Financial Statements. Attached to
Schedule 4.6 are copies of GameTek's and ART's respective
unaudited balance sheets as of June 15, 1997 (the "Balance
Sheets"). Said Balance Sheets fairly present the financial
position of each of GameTek and ART as at the dates thereof
and each is true and correct in all material respects.
Notwithstanding the foregoing or any other provision hereof
to the contrary, neither Stockholder nor Sellers make any
representation or warranty of any kind regarding the
collectability of any account receivable or note receivable
reflected on the Balance Sheets, the availability to any
person or entity of any set-offs, contras, counterclaims,
rights of recoupment or similar claims to any portion
thereof, or with respect to the likelihood or amount of
future product returns or claims for price protection,
discounts, allowances or similar claims in respect of
products sold prior to the Closing hereunder, or with
respect to the inventory shown thereon except as provided in
Section 4.11 below. Except as set forth on Schedule 4.6,
the books and records of each of GameTek and ART are in all
material respects complete and correct, have been maintained
in accordance with good business practices, and accurately
reflect the basis for the financial condition of each of
GameTek and ART as set forth in the aforementioned financial
statements.
4.7 Absence of Undisclosed Liabilities.
Subject to the penultimate sentence of Section 4.6, and
except for Permitted Encumbrances, Sellers have no
liabilities or obligations of any nature whatsoever, whether
accrued, absolute, contingent or otherwise which have not
been (i) in the case of liabilities and obligations of a
type customarily reflected on a corporate balance sheet
prepared in accordance with generally accepted accounting
principles, set forth on the balance sheet described in
subparagraph 4.6 above or (ii) in the case of other types of
liabilities and obligations, described in any of the
Schedules delivered pursuant hereto or omitted from said
Schedules in accordance with the terms of this Agreement, or
(iii) incurred, consistent with past practice, in the
ordinary course of business since June 15, 1997 (in the case
of liabilities and obligations of the type referred to in
clause (i) above).
4.8 Properties. (a) Stockholder has good
and valid title to all of the Purchased Assets, free and
clear of all mortgages, liens, pledges, claims, charges or
encumbrances of any nature whatsoever ("Liens"), except for
Permitted Encumbrances and for those which are described on
Schedule 4.8 hereto.
(b) Except as set forth on Schedule 4.8 and
except for Permitted Encumbrances, each Seller has good and
valid title to all of the properties and assets, reflected
on the Balance Sheet as owned by it or thereafter acquired,
except properties or assets sold or otherwise disposed of in
the ordinary course of business, free and clear of any and
all Liens except for Permitted Encumbrances and Liens not
yet due and payable or being contested in good faith by
appropriate proceedings. All plants, structures and
equipment which are utilized in the Sellers' Businesses, or
are material to the condition (financial or otherwise) of
either Seller are owned or leased by either Seller.
Schedule 4.8 sets forth all (a) real property which is
owned, leased (whether as lessor or lessee) or subject to
contract or commitment of purchase or sale or lease (whether
as lessor or lessee) by either Seller, or which is subject
to a title retention or conditional sales agreement or other
security device, and (b) tangible personal property which is
owned, leased (whether as lessor or lessee) or subject to
contract or commitment of purchase or sale or lease (whether
as lessor or lessee) by either Seller.
(c) Except as otherwise provided herein or in
any third party agreement identified in Schedule 1.3, Buyer
shall receive, pursuant to this Agreement as of the Closing
Date, complete and exclusive right, title and interest in
and to all tangible and intangible property rights existing
in the Existing Titles and UK Titles.
(d) Except as otherwise provided herein or in
any third party agreement identified in Schedule 1.3,
Stockholder has developed the Existing Titles and UK Titles
entirely through its own efforts for its own account.
(e) To the best of Stockholder's knowledge,
except as otherwise provided herein or in any third party
agreement identified in Schedule 1.3, the Existing Titles
and UK Titles do not infringe any patent, copyright or trade
secret of any third party.
(f) Except as otherwise provided herein or in
any third party agreement identified in Schedule 1.3, all
personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the
conception and development of the Existing Titles and UK
Titles either (1) have been party to a work-for-hire
relationship with Stockholder that has accorded Stockholder
full, effective and exclusive original ownership of all
tangible and intangible property arising with respect to the
Existing Titles and UK Titles or (2) have executed
appropriate instruments of assignment in favor of
Stockholder as assignee that have conveyed to Stockholder
full, effective and exclusive ownership of all tangible and
intangible property thereby arising with respect to the
Existing Titles and UK Titles.
4.9 Litigation. Other than as set forth in
Schedule 4.9 annexed hereto, there are no suits or actions,
or administrative, arbitration or other proceedings or
governmental investigations, pending or, to the best of the
knowledge of Stockholder or Sellers, threatened, against or
relating to Sellers, the Business or any of the Purchased
Assets. There are no judgments, orders, stipulations,
injunctions, decrees or awards in effect which relate to
Sellers, the Business or any of the Purchased Assets, the
effect of which is (A) to limit, restrict, regulate, enjoin
or prohibit any business practice in any area, or the
acquisition of any properties, assets or businesses, or (B)
otherwise materially adverse to the Business or any of the
Purchased Assets.
4.10 No Violation of Law. Sellers and/or
Stockholder, as the case may be, are not engaging in any
activity or omitting to take any action as a result of which
(A) they are in violation of any law, rule, regulation,
zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or
governmental or administrative body or agency, applicable to
Sellers, the Business or any of the Purchased Assets,
including, but not limited to, those relating to:
occupational safety and health; environmental and ecological
protection (e.g., the use, storage, handling, transport or
disposal of pollutants, contaminants or hazardous or toxic
materials or wastes, and the exposure of persons thereto);
business practices and operations; labor practices; employee
benefits; and zoning and other land use, and (B) Seller, the
Business and/or any of the Purchased Assets have been or
will be materially and adversely affected.
4.11 Inventories. To the best knowledge of
Stockholder and Sellers, the inventories reflected on the
Balance Sheets and thereafter added consist of items of a
quality and quantity usable or saleable in the ordinary
course of business, except for obsolete materials, slow-moving items,
materials of below standard quality and not
readily marketable items, all of which have been written
down to net realizable value or adequately reserved against
on the books and records of GameTek, ART, or GameTek
Deutschland GmbH, respectively.
4.12 Intellectual Property. Annexed hereto
as Schedule 4.12 is a list containing a complete and correct
list of all (A) United States and foreign patents, trademark
and trade name registrations, trademarks and trade names,
brandmarks and brand name registrations, servicemarks and
servicemark registrations, assumed names and copyrights and
copyright registrations, owned in whole or in part or used
by Sellers or with respect to the Software Assets, and all
applications therefor, (B) inventions, discoveries,
improvements, processes, formulae, proprietary rights and
trade secrets required for the development of the Software
Assets and sequels thereof, and (C) licenses and other
agreements to which Sellers or Stockholder (with respect to
the Purchased Assets) are a party to or otherwise bound
which relate to any of the foregoing. Except as expressly
set forth in the documents listed in Schedule 4.8, (A)
Sellers or Stockholder owns or has the right to use all of
the foregoing; (B) no proceedings have been instituted, are
pending or, to the best of the knowledge of Sellers and
Stockholder are threatened, which challenge the rights of
Sellers or Stockholder in respect thereto or the validity
thereof; and (C) to the best of the knowledge of Sellers and
Stockholder, none of the aforesaid violates any laws,
statutes, ordinances or regulations, or has at any time
infringed upon or violated any rights of others, or is being
infringed by others; and (D) to the best knowledge of
Sellers and Stockholder, none of the aforesaid is subject to
any outstanding order, decree, judgment, stipulation or
charge. The foregoing sentence notwithstanding, Buyer
acknowledges that the title Dark Colony is subject to an
existing distribution agreement with Strategic Simulations,
Inc. and that the GameBoy Titles are subject to a
distribution agreement with Microware, Inc., copies of which
have been provided to Buyer. To the extent owned by
Stockholder or Sellers, the Existing Titles and UK Titles
are fully eligible for protection under applicable copyright
law and has not been forfeited to te public domain; and that
the source code and system specifications for the Existing
Titles and UK Titles have been maintained in confidence.
4.13 Tax Matters. GameTek and ART,
respectively, have filed with the appropriate governmental
agencies all tax returns and reports required to be filed by
it, and has paid in full or made adequate provision for the
payment of, all taxes, interest, penalties, assessments and
deficiencies shown to be due or claimed to be due on such
tax returns and reports, except that ART has not yet filed
tax returns for the fiscal year ending July 31, 1996. The
provision for income and other taxes which is set forth on
the balance sheets referred to in subparagraph 4.6 above,
together with any available tax receivable or loss
carryforward or other tax credit, are adequate for all
accrued and unpaid income taxes of Sellers as of June 15,
1997, whether (A) incurred in respect of or measured by
income of Sellers for any periods prior to the close of
business on that date, or (B) arising out of transactions
entered into, or any state of facts existing on or prior to
that date. To the best knowledge of Stockholder and
Sellers, Sellers have not executed or filed with any taxing
authority any agreement extending the period for the
assessment or collection of any income or other taxes, and
is not a party to any pending or, to the best of the
knowledge of Sellers, threatened, action or proceeding by
any governmental authority for the assessment or collection
of income or other taxes. The United States federal income
tax returns of Seller have not been examined by the Internal
Revenue Service ("the IRS"). Seller has paid all V.A.T. and
other taxes due with respect to periods prior to the Closing
to the extent due and payable on or before the date hereof.
Buyer, Sellers and Stockholder will cooperate with each
other in the filing of all required tax returns of Sellers
for all periods ending on or prior to Closing.
4.14 Insurance. To the best knowledge of
Stockholder and Sellers, annexed hereto as Schedule 4.14 is
a list containing a complete and correct list and summary
description of all policies of insurance relating to any of
the Purchased Assets, the Business or in which Sellers or
Stockholder is an insured party, beneficiary or loss payable
payee. Such policies are in full force and effect, all
premiums due and payable with respect thereto have been
paid, and no notice of cancellation or termination has been
received by Sellers or Stockholder with respect to any such
policy.
4.15 Banks; Powers of Attorney. Schedule
4.15 is a complete and correct list showing (i) the names of
each bank in which Sellers have an account or safe deposit
box and the names of all persons authorized to draw thereon
or who have access thereto, and (ii) the names of all
persons, if any, holding powers of attorney from Sellers or
Stockholder with respect to the Software Assets.
4.16 Employee Arrangements. To the best
knowledge of Stockholder and Sellers, Schedule 4.16 is a
complete and correct list and summary description of all (i)
union, collective bargaining, employment, management,
termination and consulting agreements to which Sellers are a
party or otherwise bound, and (ii) compensation plans and
arrangements; bonus and incentive plans and arrangements;
deferred compensation plans and arrangements; pension and
retirement plans and arrangements; profit-sharing and thrift
plans and arrangements; stock purchase and stock option
plans and arrangements; hospitalization and other life,
health or disability insurance or reimbursement programs;
holiday, sick leave, severance, vacation, tuition
reimbursement, personal loan and product purchase discount
policies and arrangements; and other plans or arrangements
providing for benefits for employees of Sellers. Said
Schedule also lists the names and compensation of all
employees of Seller whose earnings during the last fiscal
year was U.S.$50,000 or more (including bonuses and other
incentive compensation), and all employees who are expected
to receive at least said amount in respect of the present
year.
4.17 Certain Business Matters. Except as is
set forth in Schedule 4.17 neither Sellers nor the Purchased
Assets are (a) a party to or bound by any distributorship,
dealership, sales agency, franchise or similar agreement
which relates to the sale or distribution of the Purchased
Assets, (b) to the best knowledge of Sellers and
Stockholder, there are no pending, or to the best of the
knowledge of Sellers threatened, labor negotiations, work
stoppages or work slowdowns involving or affecting the
Sellers' businesses, and, to the best of the knowledge of
Sellers, no union representation questions exist, and there
are no organizing activities, in respect of any of the
employees of Sellers, or (c) to the best knowledge of
Sellers and Stockholder, the product warranties given by
Sellers, or Stockholder with respect to the Existing Titles,
or by which they are bound (complete and correct copies or
descriptions of which have heretofore been delivered by
Sellers and Stockholder to Buyer) entail no greater
obligations than are customary in the businesses of Sellers
and Stockholder.
4.18 Certain Contracts. To the best knowledge of
Sellers and Stockholder, set forth on Schedule 4.18 is a
complete and correct list of all contracts, commitments,
obligations and understandings which are not set forth in
any other Schedule delivered hereunder and to which the
Sellers are a party or otherwise bound, except for each of
those which (a) was made in the ordinary course of business,
and (b) either (i) is terminable by Sellers will be
terminable by Buyer) without liability, expense or other
obligation on thirty (30) days' notice or less, or (ii) may
be anticipated to involve aggregate payments to or by
Sellers or Stockholder of $5,000 (or the equivalent) or less
calculated over the full term thereof, and (c) is not
otherwise material to the Sellers' businesses. Also set
forth on Schedule 4.18 is a complete and correct list of
contracts, commitments, obligations and undertakings to
which the Existing Titles and UK Titles are subject. Except
as set forth in the immediately preceding sentence, there
are no agreements or arrangements in effect with respect to
the marketing, distribution, licensing or promotion of the
Existing Titles and UK Titles by any independent
salesperson, distributor, sublicensor or other remarketer or
sales organization. To the best knowledge of Stockholder
and Sellers, complete and correct copies of all contracts,
commitments, obligations and undertakings set forth on any
of the Schedules delivered pursuant to this Agreement have
been furnished by Sellers and Stockholder to Buyer or have
been made available for Buyer's inspection at Seller's
offices, and except as expressly stated on the Schedule on
which they are set forth to the best of Seller's knowledge,
(a) each of them is in full force and effect, no person or
entity which is a party thereto or otherwise bound thereby
is in default thereunder, and, to the best of the knowledge
of Sellers and Stockholder, no event, occurrence, condition
or act exists which does (or which with the giving of notice
or the lapse of time or both would) give rise to a default
or right of cancellation, acceleration or loss of
contractual benefits thereunder; (b) there has been no
threatened cancellations thereof, and there are no
outstanding disputes thereunder; except, in any of the
foregoing cases, where such default, cancellation or the
like (i) would not have a materially adverse effect on the
Business, the Sellers or the value of the Purchased Assets
or (ii) results from the change of control, transfer, sale
and assignment effected by the terms of the agreements
identified on Schedule 1.3 by reason of the Closing under
this Agreement.
4.19 Approvals. Set forth on Schedule 4.19
hereto, is a complete and correct list of all governmental
and administrative consents, permits, appointments,
approvals, licenses, certificates and franchises which, to
Stockholder's knowledge, are necessary for the operation of
the Sellers' businesses, all of which have been obtained by
Sellers and are in full force and effect.
4.20 Business Practices and Commitments.
Intentionally Omitted.
4.21 Brokers. No agent, broker, person, or
firm acting on behalf of Sellers or Stockholder, or under
their respective authority, is or will be entitled to a
financial advisory fee, brokerage commission or other like
payment in connection with any of the transactions
contemplated hereby except for the fee payable by
Stockholder to Tanner & Company.
4.22 Customers and Suppliers. Stockholder
has previously provided to Buyer, to the best of
Stockholder's knowledge, a complete and correct list setting
forth, for each of GameTek and ART, for the twelve months
ended July 31, 1996 and July 31, 1997 (projected), (a) the
10 largest customers of each Seller's businesses and the
amount for which each such customer was invoiced, and (b)
the 10 largest suppliers of each Seller's businesses and the
amount of goods and services purchased from each such
supplier. To the Stockholder's knowledge, the aforesaid
suppliers and customers will continue their respective
relationships with the Sellers after the Closing Date on
substantially the same basis as now exists.
4.23 Information as to Sellers and
Stockholder. None of the representations or warranties made
by Sellers or Stockholder in this Agreement or in any
agreement executed and delivered by or on behalf of any of
them pursuant hereto are false or misleading with respect to
any material fact, or omit to state any material fact
necessary in order to make the statements therein contained
not misleading.
4.24 Nature of Securities. Stockholder
understands that as of the date hereof (a) the Stock
Consideration has not been registered under the Securities
Act of 1933, as amended (the "Act"), based upon an exemption
from such registration requirements; (b) the Stock
Consideration to be received is "restricted securities," as
said term is defined in Rule 144 of the General Rules and
Regulations promulgated under the Act; (c) the Stock
Consideration to be received may not be sold or otherwise
transferred unless it has first been registered under the
Act and applicable state securities laws or an exemption
from the registration provisions of the Act and applicable
state securities laws are available with respect to the
proposed sale or transfer; (d) the certificates evidencing
the Stock Consideration will bear a legend to the effect
that the transfer thereof is restricted; and (e) stop
transfer instructions will be placed with the transfer agent
for the Stock Consideration.
4.25 Investment Representations.
(i) Stockholder or its representatives have received and
carefully reviewed Buyer's registration statement on
Form SB-2 as declared effective by the Securities and
Exchange Commission (the "SEC") on April 14, 1997 and most
recent Form 10-QSB, and except for the foregoing and the
representations and warranties contained herein, Stockholder
has not been furnished with any other materials or
literature relating to the Buyer or the Stock Consideration;
(ii) Stockholder or its representatives have had a
reasonable opportunity to ask questions of and receive
answers from Buyer concerning Buyer and the Stock
Consideration.
4.26 As used herein, the terms "to the best
of Stockholder's knowledge", "to the best of Sellers'
knowledge" or words of similar import shall mean only the
actual knowledge of J. William Blue, Jr., Robert L.
Underwood III, J. Thomas Reuterdahl or Max Rudminat.
5. Representations and Warranties as to Buyer.
Buyer hereby represents and warrants to Stockholder as
follows:
5.1 Organization, Standing and Power. Buyer
is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate
its properties and to carry on its business as presently
conducted by it.
5.2 Authority. The execution and delivery
by Buyer of this Agreement and of each agreement, document
and instrument to be executed and delivered by it pursuant
hereto, the compliance by Buyer with the provisions hereof
and thereof, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of
Buyer, and Buyer has all necessary corporate power with
respect thereto. This Agreement is, and when executed and
delivered by Buyer each other agreement to be executed and
delivered by it pursuant hereto will be, the valid and
binding obligation of Buyer in accordance with its terms.
Neither the execution and delivery by Buyer of this
Agreement or of any of the aforementioned other agreements,
nor the consummation of the transactions contemplated hereby
or thereby, nor the compliance by Buyer with the provisions
hereof and thereof, will (nor with the giving of notice or
the lapse of time or both, would) conflict with or result in
a violation of any provision of the Certificate of
Incorporation or By-laws of Buyer, or in the breach of any
material agreement to which Buyer is a party or otherwise
bound.
5.3 Securities and Exchange Commission
Filings; Financial Statements. Buyer has filed all forms,
reports, statements and documents required to be filed with
the SEC since April 14, 1997, (collectively, the "SEC
Reports"), each of which has complied in all material
respects with the applicable requirements of the Act or the
Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, each as in effect on the date so filed. Buyer
has delivered to the Stockholder, in the form filed with the
SEC (including any amendments thereto), (A) its Quarterly
Report on Form 10-QSB for the quarter ended April 30, 1997
(the "April 30 10-QSB") and (B) its Prospectus dated
April 14, 1997. None of such forms, reports or documents
(including but not limited to any financial statements or
schedules included or incorporated by reference therein)
filed by the Buyer, when filed (except to the extent revised
or superseded by a subsequent filing with the SEC) contained
any untrue statement of a material fact or omitted to state
a material fact required to be stated or incorporated by
reference therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. The financial
statements included in such forms were prepared in
accordance with generally accepted accounting principles
consistently applied, and fairly present the financial
position of Buyer as at the dates thereof and its results of
operations for the periods indicated, except that any
unaudited financial statements are subject to normal
reoccurring adjustments which might be required as a result
of year-end audits.
5.4 Capitalization. The authorized capital
stock of Buyer consists of 15,000,000 shares of Common Stock
and 5,000,317 shares of Preferred stock, par value $.01 per
share, of which, as of the date hereof, 7,847,455 shares of
Common Stock and 317 shares of preferred stock are issued
and outstanding. All issued shares of Buyer's Common Stock
have been duly and validly issued and are fully paid and
nonassessable. Except as set forth in the SEC Reports or
the other documents specifically set forth in Schedule 5.4,
there are no outstanding options, warrants, rights, puts,
calls, commitments, conversion rights, plans or other
agreements of any character to which Buyer is a party or
otherwise bound which provide for the acquisition,
disposition or issuance of any issued but not outstanding,
outstanding, or authorized and unissued shares of Buyer
Common Stock or preferred stock. There is no personal
liability, and there are no preemptive or similar rights,
attached to Buyer's Common Stock.
5.5 Absence of Changes. Since January 31,
1997, there have not been (i) any material adverse changes
in the condition (financial or otherwise), assets,
liabilities, business, prospects, or results of operations
of Buyer (including, without limitation, any such adverse
change resulting from damage, destruction or other casualty
loss, whether or not covered by insurance), (ii) any
declarations, setting asides or payments of any dividend or
other distribution or payments in respect of the capital
stock of Buyer, or (iii) any changes in the accounting
principles or methods which are utilized by Buyer.
5.6 Litigation. Except as set forth in the
SEC Reports, there are no material suits or actions, or
administrative, arbitration or other proceedings or
governmental investigations, pending or, to the best of the
knowledge of Buyer threatened, against or relating to Buyer.
Except as set forth in SEC Reports there are no material
judgments, orders, stipulations, injunctions, decrees or
awards in effect which relate to Buyer, Buyer's business or
any of its assets, the effect of which is (A) to limit,
restrict, regulate, enjoin or prohibit any business practice
in any area, or the acquisition of any properties, assets or
businesses, or (B) otherwise to have a material adverse
effect on the condition (financial or otherwise), assets,
liabilities, business, prospects or results of operations of
Buyer.
5.7 Information as to Buyer. None of the
representations or warranties made by Buyer in this
Agreement or in any agreement executed and delivered by or
on behalf of it pursuant hereto are false or misleading with
respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein
contained not misleading.
6. Representations and Warranties as to Stock
Consideration. Buyer represents and warrants to the
Stockholder that the Stock Consideration, when issued, will
be, (i) duly authorized and validly issued, fully paid and
non-assessable, (ii) delivered hereunder free and clear of
any security interests, pledges, mortgages, claims, liens
and encumbrances of any kind whatsoever except that the
Stock Consideration will be "restricted securities" as such
term is defined in the rules and regulations of the
Securities Exchange Commission and will be subject to
restrictions on transfers pursuant to such rules and
regulations and State laws, and (iii) issued in compliance
with all applicable federal and state securities laws.
7. Indemnification.
7.1 Indemnification by Sellers and
Stockholder. Sellers and Stockholder hereby jointly and
severally agree to indemnify and hold Buyer harmless from
and against any and all losses, obligations, deficiencies,
liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered
into pursuant hereto, and all reasonable legal and other
expenses incurred in connection with the investigation,
prosecution or defense of any matter indemnified pursuant
hereto) which Buyer may sustain, suffer or incur and which
arise out of, are caused by, relate to, or result or occur
from or in connection with (i) the Retained Liabilities,
(ii) the noncompliance with any applicable bulk transfer
laws of any jurisdiction, or (iii) the breach by Sellers or
Stockholder of any representation, warranty or covenant made
by it in this Agreement or in any agreement or instrument
executed and delivered pursuant hereto.
7.2 Indemnification by Buyer. Buyer hereby
agrees to indemnify and hold Sellers and Stockholder
harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and
expenses (including, without limitation, the amount of any
settlement entered into pursuant hereto, and all reasonable
legal and other expenses incurred in connection with the
investigation, prosecutor defense of any matter indemnified
pursuant hereto), which any of them may sustain, suffer or
incur and which arise out of, are caused by, relate to, or
result or occur from or in connection with (i) the Assumed
Liabilities, or (ii) the breach by Buyer of any
representation, warranty or covenant made by it in this
Agreement or in any agreement or instrument executed and
delivered pursuant hereto.
7.3 Third Party Claims. If a claim by a
third party is made against any party or parties hereto and
the party or parties against whom said claim is made intends
to seek indemnification with respect thereto under this
paragraph 7, the party or parties seeking such
indemnification shall promptly notify the indemnifying party
or parties, in writing, of such claim; provided, however,
that the failure to give such notice shall not affect the
rights of the indemnified party or parties hereunder unless
such failure materially and adversely affects the
indemnifying party or parties. The indemnifying party or
parties shall have ten days after said notice is given to
elect, by written notice given to the indemnified party or
parties, to undertake, conduct and control, through counsel
of their own choosing (subject to the consent of the
indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense,
the good faith settlement or defense of such claim, and the
indemnified party or parties shall cooperate with the
indemnifying parties in connection therewith; provided: (i)
in the case of Sellers and/or Stockholder as the
indemnifying party or parties, it or they shall not thereby
permit to exist any lien, encumbrance or other adverse
change upon any of the Purchased Assets, Buyers or the
Business, and (ii) the indemnified party or parties shall be
entitled to participate in such settlement or defense
through counsel chosen by the indemnified party or parties,
provided that the fees and expenses of such counsel shall be
borne by the indemnified party or parties. So long as the
indemnifying party or parties are contesting any such claim
in good faith, the indemnified party or parties shall not
pay or settle any such claim; provided, however, that
notwithstanding the foregoing, the indemnified party or
parties shall have the right to pay or settle any such claim
at any time, provided that in such event they shall waive
any right of indemnification therefor by the indemnifying
party or parties. If the indemnifying parties do not make a
timely election to undertake the good faith defense or
settlement of the claim as aforesaid, or if the indemnifying
parties fail to proceed with the good faith defense or
settlement of the matter after making such election, then,
in either such event, the indemnified party or parties shall
have the right to contest, settle or compromise the claim at
their exclusive discretion, at the risk and expense of the
indemnifying parties to the full extent set forth in
subparagraph 7.1 or 7.2 hereof, as the case may be.
7.4 Limitations Upon Indemnification. Buyer
shall not have any right to indemnification under this
paragraph 7 or otherwise to recover damages against
Stockholder based upon the breach of a representation or
warranty by Sellers or Stockholder unless and until the
amount of its claims is in excess of $100,000.00 (the
"Retained Indemnification") in the aggregate. The
obligation of Stockholder to indemnify or pay damages to
Buyer for any breach of representation or warranty shall
apply only to the excess of the aggregate amount of all such
claims over $100,000.00. Buyer shall not be entitled to
assert as a defense, counterclaim or set-off against any
portion of the Purchase Price any claim for indemnification
or damages, it being the intention of the parties that
Buyer's obligation to pay the Purchase Price and perform
under the Promissory Notes and the Registration Rights
Agreement be absolute and unconditional and that any claim
for indemnification or damages should be asserted by Buyer
in a separate action.
8. Miscellaneous Provisions.
8.1 Expenses. Except as otherwise provided
in this Agreement, Stockholder, on the one hand, shall pay
its and Sellers' costs and expenses and Buyer shall pay its
own costs and expenses in connection with this Agreement and
the transactions contemplated hereby.
8.2 Execution in Counterparts. This
Agreement may be executed in one or more counterparts, and
by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original but all of
which taken together shall constitute one and the same
agreement, and shall become effective when one or more
counterparts has been signed by each of the parties hereto
and delivered to each of the other parties hereto.
8.3 Notices. All notices, requests, demands
and other communications given hereunder shall be in writing
and shall be deemed to have been duly given: (i) on the
date of delivery, if delivered personally or by messenger,
(ii) on the first business day following the date of timely
deposit with Federal Express or other nationally recognized
overnight courier service, if sent by such courier
specifying next day delivery, (iii) upon receipt of
confirmation of transmission, if transmitted by telecopier;
and (iv) on the third business day after mailing, if mailed
by registered or certified mail (postage prepaid, return
receipt requested); provided, however, that a notice of
change of address or telecopier number shall not be deemed
to have been given until actually received by the addressee.
All such notices, requests, demands and other communications
shall be addressed as set forth below or to such other
address or telecopier number as either party hereto may
designate to the other party hereto by like notice (except
that a notice of change of address shall only be effective
upon receipt):
If to Buyer, to: Take Two Interactive Software
575 Broadway
New York, New York 10012
Attn: Ryan A. Brant
Copy to: Tenzer Greenblatt LLP
23rd Floor
405 Lexington Avenue
New York, New York 10174
Attn: Barry S. Rutcofsky
If to Stockholder, to: GameTek (FL), Inc.
c/o J. William Blue, Jr., Esq.
The Northern Blue Law Firm
100 Europa Drive
Suite 550
Chapel Hill, North Carolina 27515-2208
Copy to: Ackerman, Levine & Cullen, LLP
175 Great Neck Road
Great Neck, New York 11021
Attn: Leslie Levine, Esq.
If to ART, to: Alternative Reality
Technologies, Inc.
c/o J. William Blue, Jr., Esq.
The Northern Blue Law Firm
100 Europa Drive
Suite 550
Chapel Hill, North Carolina 27515-2208
If to GameTek, to: GameTek (UK) Limited
c/o J. William Blue, Jr., Esq.
The Northern Blue Law Firm
100 Europa Drive
Suite 550
Chapel Hill, North Carolina 27515-2208
8.4 Amendment. This Agreement may only be
amended by a written instrument executed by each of the
parties hereto.
8.5 Entire Agreement. This Agreement
(together with the other agreements and documents being
delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and
written, with respect to the subject matter hereof, other
than the Confidentiality Agreement which shall remain in
full force and effect.
8.6 Applicable Law. This Agreement shall be
governed by the laws of the State of New York applicable to
contracts made and to be wholly performed therein.
8.7 Headings. The headings contained herein
are for the sole purpose of convenience of reference, and
shall not in any way limit or affect the meaning or
interpretation of any of the terms or provisions of this
Agreement.
8.8 Assignment. Neither this Agreement nor
any rights, interests or obligations hereunder may be
assigned (by operation of law or otherwise) by any party
hereto without the prior written consent of all of the
parties hereto.
8.9 Binding Effect; Benefits. This
Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
Nothing herein contained, express or implied, is intended to
confer upon any person other than the parties hereto and
their respective heirs, legal representatives, successors
and permitted assigns, any rights or remedies under or by
reason of this Agreement.
8.10 Waiver, etc. The failure of any of the
parties hereto to at any time enforce any of the provisions
of this Agreement shall not be deemed or construed to be a
waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the
right of any of the parties hereto to thereafter enforce
each and every provision of this Agreement. No waiver of
any breach of any of the provisions of this Agreement shall
be effective unless set forth in a written instrument
executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any
such breach shall be construed or deemed to be a waiver of
any other or subsequent breach.
8.11 Severability. Any provision of this
Agreement which is held by a court of competent jurisdiction
to be prohibited or unenforceable in any jurisdiction(s)
shall be, as to such jurisdiction(s), ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision
in any other jurisdiction.
<PAGE>
8.12 Announcements. No party hereto shall
issue any press release or otherwise make any public
statement with respect to the existence of this Agreement or
the transactions contemplated hereby without the prior
approval of the other parties hereto, except as may be
required by applicable law or the applicable rules or
regulations of any stock exchange (upon reasonable prior
written notice to the other party).
8.13 Schedules. The Schedules delivered
pursuant to this Agreement are an integral part hereof.
Each such Schedule shall be in writing, shall indicate the
subparagraph pursuant to which it is being delivered, and
shall be initialled by the delivering party.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto as of the date
first above written.
Attest: TAKE TWO INTERACTIVE
SOFTWARE, INC.
By: /s/ Ryan A. Brant, CEO
------------------------------
President
- ----------------------
Secretary
Attest: GAMETEK (FL), INC.
By: /s/ Robert L. Underwood
-------------------------------
Authorized Signer
_______________________
Secretary
Attest: GAMETEK (UK), INC.
By: /s/ Kelly Sumner
--------------------------------
President
- ------------------------
Secretary
Attest: ALTERNATIVE REALITY
TECHNOLOGIES, INC.
By: /s/ Robert L. Underwood
----------------------------------
Vice President
- -------------------------
Secretary
TABLE OF CONTENTS
Page
1. Purchase and Sale Agreement. . . . . . . . . . . 2
1.1 Agreement of Purchase and Sale . . . . . . 2
1.2 Purchased Assets . . . . . . . . . . . . . 2
1.3 Assumed Liabilities. . . . . . . . . . . . 3
1.4 Purchase Price . . . . . . . . . . . . . . 4
2. Closing. . . . . . . . . . . . . . . . . . . . . 4
2.1 Closing Date . . . . . . . . . . . . . . . 4
2.2 Action by Buyer. . . . . . . . . . . . . . 4
2.3 Action by Stockholder. . . . . . . . . . . 5
3. Additional Covenants . . . . . . . . . . . . . . 6
3.1 Further Assurances . . . . . . . . . . . . 6
3.2 Confidentiality. . . . . . . . . . . . . . 6
3.3 Payment of Taxes Upon Transfer of
Purchased Assets . . . . . . . . . . . . . 6
3.4 Survival of Representations and
Warranties . . . . . . . . . . . . . . . . 6
3.5 Books and Records. . . . . . . . . . . . . 7
3.6 Distribution and/or License Agreement. . . 7
3.7 Employment Agreement . . . . . . . . . . . 8
3.8 Discharge of Liens . . . . . . . . . . . . 8
3.9 Cancellation of Intercompany
Indebtedness . . . . . . . . . . . . . . . 8
3.10 Retained Liabilities. . . . . . . . . . . 8
3.11 Registration Rights . . . . . . . . . . . 8
4. Representations and Warranties as to Seller
and Stockholder . . . . . . . . . . . . . . . . 9
4.1 Organization, Standing and Power . . . . . 9
4.2 Capitalization . . . . . . . . . . . . . . 9
4.3 Interests in Other Entities. . . . . . . . 10
4.4 Authority. . . . . . . . . . . . . . . . . 11
4.5 Noncontravention . . . . . . . . . . . . . 11
4.6 Financial Statements . . . . . . . . . . . 12
4.7 Absence of Undisclosed Liabilities . . . . 13
4.8 Properties . . . . . . . . . . . . . . . . 14
4.9 Litigation . . . . . . . . . . . . . . . . 16
4.10 No Violation of Law . . . . . . . . . . . 16
4.12 Use of Name.. . . . . . . . . . . . . . . 17
4.13 Intellectual Property.. . . . . . . . . . 17
4.14 Tax Matters . . . . . . . . . . . . . . . 18
4.15 Insurance . . . . . . . . . . . . . . . . 19
4.16 Banks; Powers of Attorney . . . . . . . . 20
4.17 Employee Arrangements . . . . . . . . . . 20
4.18 Certain Business Matters. . . . . . . . . 21
4.19 Certain Contracts . . . . . . . . . . . . 21
4.20 Approvals . . . . . . . . . . . . . . . . 22
4.21 Business Practices and Commitments. . . . 23
4.22 Brokers . . . . . . . . . . . . . . . . . 23
4.23 Customers and Suppliers . . . . . . . . . 23
4.24 Information as to Sellers and
Stockholder. . . . . . . . . . . . . . . . 24
4.25 Nature of Securities. . . . . . . . . . . 24
4.26 Investment Representations. . . . . . . . 25
4.27 . . . . . . . . . . . . . . . . . . . . . 25
5. Representations and Warranties as to Buyer . . . 25
5.1 Organization, Standing and Power . . . . . 25
5.2 Authority. . . . . . . . . . . . . . . . . 26
5.3 Securities and Exchange Commission
Filings; Financial Statements. . . . . . . 26
5.4 Capitalization . . . . . . . . . . . . . . 27
5.5 Absence of Changes . . . . . . . . . . . . 28
5.6 Litigation . . . . . . . . . . . . . . . . 28
5.7 Information as to Buyer. . . . . . . . . . 29
6. Representations and Warranties . . . . . . . . . 29
7. Indemnification. . . . . . . . . . . . . . . . . 30
7.1 Indemnification by Sellers and
Stockholder. . . . . . . . . . . . . . . . 30
7.2 Indemnification by Buyer . . . . . . . . . 30
7.3 Third Party Claims . . . . . . . . . . . . 31
7.4 Limitations Upon Indemnification . . . . . 32
7.6 Validity of Transactions . . . . . . . . . 33
7.7 . . . . . . . . . . . . . . . . . . . . . 33
7.8 Performance of Agreements. . . . . . . . . 34
7.9 . . . . . . . . . . . . . . . . . . . . . 34
7.10 Expenses. . . . . . . . . . . . . . . . . 34
7.11 Execution in Counterparts . . . . . . . . 34
7.12 Notices . . . . . . . . . . . . . . . . . 34
7.13 Amendment . . . . . . . . . . . . . . . . 36
7.14 Entire Agreement. . . . . . . . . . . . . 36
7.15 Applicable Law. . . . . . . . . . . . . . 36
7.16 Headings. . . . . . . . . . . . . . . . . 36
7.17 Assignment. . . . . . . . . . . . . . . . 37
7.18 Binding Effect; Benefits. . . . . . . . . 37
7.19 Waiver, etc . . . . . . . . . . . . . . . 37
7.20 Severability. . . . . . . . . . . . . . . 38
7.21 Announcements . . . . . . . . . . . . . . 38
7.22 Schedules . . . . . . . . . . . . . . . . 38
EXHIBIT 10.2
July 28, 1997
GameTek, Inc.
c/o Northern Blue, L.L.P.
100 Europa Drive
Suite 550
Chapel Hill, North Carolina 27514
Re: GameTek, Inc. and Affiliates (collectively,
"GameTek") and Ocean Bank (the "Bank")
Gentlemen:
When countersigned below by an authorized
officer of GameTek and returned to the Bank by telefax by
July 29, 1997, this letter will constitute our agreement
concerning the satisfaction of GameTek's obligations to
the Bank under various loan, security and other
agreements, guaranties, pledge agreements and promissory
notes heretofore executed and delivered among GameTek and
the Bank. This Letter Agreement also implements certain
of the understandings set forth in our letter agreement of
July 25, 1997, a copy of which is attached.
The Bank understands that GameTek is in the
process of concluding the sale of its GameTek (UK) Ltd.
("UK") and Alternative Reality Technologies, Inc. ("ARTS")
subsidiaries and certain other assets to Take Two
Interactive Software, Inc. ("Take Two") pursuant to an
Asset and Stock Purchase Agreement that is expected to
close today. The Bank also understands that it is a
condition precedent to the execution and closing of the
Asset and Stock Purchase Agreement that the stock of UK
and ARTS and the other assets to be sold to Take Two be
free and clear of all liens, claims and encumbrances in
favor of the Bank. Finally, we understand that the Boards
of Directors of GameTek and its affiliates have authorized
GameTek's entry into and performance of this Letter
Agreement.
In consideration of the promises and covenants
contained in this Letter Agreement, and subject to the
receipt by the Bank of Take Two's promissory note to the
order of the Bank (the "Note"), in the form attached
hereto, and 22,257 unregistered shares of the common stock
of Take Two (the "Restricted Stock") promptly following
the closing under the Asset and Stock Purchase Agreement,
the Bank hereby (i) releases its security interest in the
assets and stock to be sold under the Asset and Stock
Purchase Agreement, and (ii) releases GameTek and each of
its affiliates and subsidiaries, including, without
limitation, Britt Resources, Inc. ("BRI") from any and all
claims, liabilities, obligations, agreements and causes of
action of every kind and nature whatsoever which the Bank
has or had at any time prior to the date hereof against
GameTek, its subsidiaries and affiliates and BRI and their
respective shareholders, officers, directors, agents and
employees. The number of shares of Restricted Stock has
been calculated by dividing the average closing price of
Take Two common stock over the period July 21-25, 1997,
into $175,000. Nothing in this Letter Agreement shall be
deemed to affect any of the Bank's rights arising under
this Letter Agreement, the Note, or with respect to the
Restricted Stock. The Bank understands that the Note and
Restricted Stock represent part of the purchase price
under the Asset and Stock Purchase Agreement and that they
are being issued directly to the Bank, rather than to
GameTek and then to the Bank, solely as a ministerial act
and as an accommodation to the parties.
In connection with the transactions contemplated
by this Letter Agreement and to induce Take Two to issue
the Note and the Restricted Stock to the Bank, the Bank
acknowledges that, as of the date hereof, (a) the
Restricted Stock has not been registered under the
Securities Act of 1933, as amended (the "Act"), based upon
an exemption from such registration requirements; (b) the
Restricted Stock to be received is "restricted
securities," as said term is defined in Rule 144 of the
General Rules and Regulations promulgated under the Act;
(c) the Restricted Stock to be received may not be sold or
otherwise transferred unless it has first been registered
under the Act and applicable state securities law or an
exemption from the registration provisions of the Act and
applicable state securities laws as are available with
respect to the proposed sale or transfer; (d) the
certificate evidencing the Restricted Stock will bear a
legend to the effect that the transfer thereof is
restricted; (e) stop transfer instructions will be placed
with the transfer agent for the Restricted Stock and (f)
the Bank is an "accredited investor" as said term is
defined in the General Rules and Regulations promulgated
under the Act.
GameTek hereby agrees that the Bank shall
participate pro rata with GameTek in any piggy-back
registration rights afforded to GameTek under a
Registration Rights Agreement between GameTek and Take Two
or otherwise. To the extent a mechanism for that
participation is not set out in the Registration Rights
Agreement or in this Letter Agreement, GameTek and the
Bank will cooperate with each other, in good faith, to
enable the Bank fully to participate pro rata in any such
piggy-back registration of the Restricted Stock to the
extent the Bank elects to do so.
In the event that Take Two defaults in payment
of its obligations under the Note and the Bank is unable
to collect interest and/or principal payable thereunder
despite its reasonable efforts to do so, BRI will assign
to the Bank the first right of recovery against the assets
of GameTek upon any foreclosure by BRI of its security
interest in the assets of GameTek. From the proceeds of
any such foreclosure and prior to BRI receiving any
payment of any kind from GameTek from such proceeds, the
Bank will be paid the amount of any defaulted amounts of
principal and unpaid interest due under the Note. Upon
such payment to the Bank, the Bank shall assign to BRI its
rights under the Note. In the event that GameTek
liquidates prior to the payment of the final installment
due under the Note, GameTek agrees that it will escrow an
amount of Take Two stock equal to the principal amount due
on the Note as of the date of the liquidation of GameTek
and such escrowed stock, or a portion thereof, shall be
assigned and delivered to the Bank by the escrow agent in
the event that Take Two fails to pay the principal and/or
interest due pursuant to the Note.
The Bank understands that Take Two will close
under the Asset and Stock Purchase Agreement as promptly
as possible following its receipt of a signed copy of this
Letter Agreement and the satisfaction of the other
conditions to closing, in part, in reliance upon the
agreements and representations of the Bank set forth
herein, including, without limitation, the Bank's
agreement to execute and deliver to GameTek (and file with
the appropriate offices of record) UCC-3 Termination
Statements with respect to any Financing Statement filed
by the Bank at any time prior to the date hereof with
respect to the assets of GameTek or any of its
subsidiaries or affiliates and the Bank hereby agrees to
prepare and file such statements with the governmental
filing offices with which the Financing Statements being
terminated thereby were heretofore filed. Such filing
shall be effected within 10 days after the Bank's receipt
of the Note and certificate for the Restricted Stock which
will be sent to the Bank immediately following the closing
under the Asset and Stock Purchase Agreement by Federal
Express for priority next business day delivery. The Bank
will provide GameTek with copies of such Termination
Statements simultaneously with their transmittal to the
governmental filing offices and will deliver to GameTek
all of the original promissory notes and guaranties
heretofore delivered to the Bank by GameTek and its
affiliates within 10 days of date.
Each of us agrees at the request of the other to
take any further steps and to execute any other
instruments as either party may reasonably request to
document, effectuate and carry out each of the
transactions contemplated by this Letter Agreement.
Please confirm GameTek's agreement to the
foregoing by signing and returning to the undersigned by
telefax as soon as possible a duplicate copy of this
Letter Agreement. Each of the signatories hereto hereby
confirms his authority to execute and deliver this Letter
Agreement as the binding obligation of the entity on
behalf of which he signed.
Very truly yours,
OCEAN BANK, INC.
By: /s/ Pablo O. Fernandez
---------------------------
Senior Vice President
Agreed to
GAMETEK, INC. for itself and its
subsidiaries and affiliates referred to herein
By: /s/ Robert L. Underwood
------------------------------
Authorized Signer
EXHIBIT 10.3
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of July 29, 1997,
between Take Two Interactive Software, Inc., a Delaware
corporation with offices at 575 Broadway, New York, New
York 10012 (collectively, "Distributor") and GameTek,
Inc., a Delaware Corporation with offices at 3 Harbor
Drive, Suite 110, Sausalito, California 94965 ("GameTek").
W I T N E S S E T H :
WHEREAS, GameTek owns or controls the rights in
and to the Game Titles (defined below), and desires to
enter into this agreement providing for Distributor's
distribution of Software Devices (defined below) embodying
the Game Titles;
WHEREAS, Distributor is engaged in the business
of distributing, marketing, selling, advertising and
otherwise exploiting Software Devices and desires to
distribute the Software Devices embodying the Game Titles
on the terms provided herein;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS:
Capitalized terms used herein, but not otherwise
defined herein, shall have the meanings set forth below:
1.1 "Basic Term" means the period commencing on
the date on which such party hereto has executed and
delivered to the other party hereto a copy of this
Agreement, and ending on the third (3rd) anniversary of
the release of the first Game Title authorized to be
released hereunder but not later than four (4) years from
the date hereof; provided, however, that the Basic Term
shall terminate sooner as to any particular Game Title on
the date on which GameTek's rights with respect to such
Game Title terminate, if they terminate prior to such
third anniversary date.
1.2 "Bug" means a repeatable phenomenon of
unintended events or actions during the running of a
Software Device under normal conditions that results in:
(a) the software component of such Software
Device being unable to perform repeatedly and without
interruption in the manner in which such Software Device
is commonly intended to be used; or
(b) the destruction or corruption of the
data embodied in such Software Device.
1.3 "Distributed Product" or "Distributed
Products" means Software Devices embodying a Game Title
and playable on the Game Machine.
1.4 "Documentation" means the technical
documentation for each Game.
1.5 "Exploitation Period" with respect to any
Game Title means the date commencing on the Effective Date
and ending on the expiration of the Basic Term with
respect to such Game Title.
1.6 "Game Machine" means the Nintendo Gameboy
portable console game system.
1.7 "Game Title" or "Game Titles" means,
individually or collectively, as the context requires, the
Gameboy software games developed by or on behalf of
GameTek that are set forth on Schedule "A" .
1.8 "Manual" means a document that describes
in reasonable detail in the English language (and any
other languages in which such documents exist) the
operation and functions of the computer software and
contains instructions for using the Distributed Products.
1.9 "SKU" or "sku" means stock keeping unit.
1.10 "Software Device" means any device on or
by which computer software and its associated visual
images, with or without sound, may be embodied or recorded
for later operation, manipulation or communication to
users and which are designed for use with the Game
Machine.
1.11 "Territory" means such countries in the
European Economic Community as constituted on the date
hereof in which GameTek has the right to market and sell
Distributed Products.
1.12 "Third Party Royalties" means, with respect
to any unit of any Game Title distributed hereunder, the
aggregate of all royalties payable by GameTek to third
parties in respect of the sale or other disposition of
such unit.
2. RIGHTS AND OBLIGATIONS OF Distributor:
Subject to the terms and conditions hereof,
GameTek hereby grants to Distributor, and Distributor
hereby accepts and agrees to perform and discharge, the
following rights and obligations, which shall be deemed
exclusive within the Territory during the Basic Term:
2.1 Distribution Rights and Obligations.
(a) GameTek hereby engages Distributor, and
Distributor hereby agrees to be engaged by GameTek, as
GameTek's sole and exclusive seller and distributor of
Distributed Products throughout the Territory during the
Exploitation Period. During the Exploitation Period for
each Game Title, Distributor shall distribute such
Distributed Products through all usual and customary
wholesale channels, and Distributor shall order and
maintain inventories of appropriate quantities of
Distributed Products with respect to each Game Title as
shall be reasonably necessary to meet anticipated demand.
(b) Distributor shall have the right to
use, publish and permit others to use and publish
GameTek's name, and, subject to any contractual
restrictions of which GameTek advises Distributor prior to
such use or publication, any names of or trademarks
associated with, or embodied in, any Game Title or
reproduction or simulation thereof, the script, speech,
images, characters, characterizations, designs, graphics,
art work and other characteristics associated with each
Game Title, and the name of each Game Title (collectively,
the "Marks"), in connection with the sale, advertising,
distribution and exploitation thereof. Prior to
commencing distribution of any Distributed Products in any
country in the Territory, Distributor shall verify the
existence of GameTek's rights to distribute such products
in such country, the obligations and conditions to which
such rights are subject, and the extent, if any, of Third
Party Royalties payable in respect of such distribution.
Distributor shall comply with the provisions of the
agreements with such third parties to the extent
Distributor is apprised of such provisions by GameTek,
insofar as they relate to Distributor's distribution of
Distributed Products hereunder.
(c) Distributor shall have the right,
solely for advertising, publicity and promotional
purposes, to perform and display the Distributed Products
publicly, and to permit the public performance thereof,
but only in a manner consistent with ordinary custom and
practice in the industry for the promotion of products
similar to the Game Titles.
(d) Distributor shall have the right to use
all artwork, textual material and other materials
furnished to Distributor by GameTek in connection with the
Distributed Products, including advertising, packaging and
wrapping materials (collectively, "Packaging and
Promotional Materials"), to the extent created by or on
behalf of GameTek in connection with Distributed Products.
(e) All rights in and to the Game Titles,
Packaging and Promotional Materials and/or Marks not
expressly granted to Distributor herein are reserved to
GameTek.
2.2 Intellectual Property Rights.
(a) As between GameTek and Distributor,
GameTek retains all copyright, patent, trade secret, trade
mark and trade name rights in and to the distributed
products, including all packaging, designs, logos,
slogans, advertising materials and promotional materials
and in all other materials delivered by GameTek to
Distributor (collectively, "GameTek Property"), and
Distributor will not have or acquire any right, title or
interest therein or thereto under any circumstance
whatsoever except for the specific rights granted herein.
Distributor shall not, during the Basic Term or at any
time thereafter, take any action that materially adversely
affects, GameTek's ownership of or rights in the GameTek
Property or the validity thereof, nor shall Distributor
apply for any registration or file any document or take
any action that would adversely affect GameTek's ownership
of or rights in the GameTek Property or knowingly aid or
abet anyone else in doing so, or use or authorize the use
of any trademark, trade name or word, symbol or
combination thereof or other designation identical with or
confusingly similar to the trademarks and/or trade names
that constitute part of the GameTek Property. Distributor
will not alter, remove, obscure, erase or deface any
proprietary rights notices contained on or incorporated in
any SKU or the packaging of any SKU. If Distributor is
called upon or required to produce any packaging,
advertising and promotional materials for a Game Title,
Distributor will include thereon such proprietary rights
notices as may be designated and approved by GameTek.
(b) Promptly upon request, Distributor will
provide GameTek with a template for Distributor's logo and
legend for inclusion on any packaging, advertising or
promotional materials produced in connection with any Game
Title, which template shall be reasonably acceptable to
GameTek. GameTek will include Distributor's logo and
legend, as incorporated in any such approved template, on
all such packaging materials with respect to Game Titles.
3. MANUFACTURING; PRICING.
3.1 GameTek represents that, prior to the
delivery of any Game Title hereunder, it shall have
designed and have the sole rights to, or obtained from
third parties all rights to the design of, the computer
software and all documentation relating to such Game
Title, to the extent necessary for same to be manufactured
into Distributed Products and distributed by Distributor
pursuant to this Agreement, and operated and perceived
through the Game Machines and otherwise used by end-users.
3.2 Distributor shall notify GameTek from time
to time reasonably in advance of any required delivery
date of the number of units that Distributor wishes
GameTek to have manufactured in order to enable
Distributor to fulfill its distribution requirements for
each Game Title. Each such notification shall be
accompanied by (i) a wire transfer of funds sufficient,
either to an account designated by GameTek or directly to
Nintendo of Japan, Inc. ("Nintendo"), to enable GameTek to
pay for the manufacture and shipment into the destination
country of the Distributed Products so ordered and to
insure such Distributed Products through delivery to
Distributor, or, if requested by GameTek, (ii) the
provision of an irrevocable documentary letter of credit
in favor of GameTek in form satisfactory to GameTek, for
the full amount of the manufacturing and shipping cost of
the goods ordered as well as the cost of insuring such
goods in transit. The aggregate of such manufacturing,
shipping and insurance costs is referred to herein as
"GameTek's Cost". Promptly after its receipt of such
order and funds or letter of credit, GameTek shall arrange
with Nintendo for the manufacture and shipment of such
Distributed Products, including the posting of requisite
letters of credit in favor of the manufacturer, and for
the appropriate insurance thereon. The balance, if any,
of GameTek's Cost, shall be payable by Distributor to
GameTek ten (10) days after receipt of such unit by the
Distributor. GameTek will cooperate, at Distributor's
cost and expense, with Distributor's efforts to establish
an agreement with Nintendo for Distributor's direct
payment to Nintendo of GameTek's Cost. If such an
agreement is reached it may include provision for direct
shipment by Nintendo of Distributed Products to
Distributor provided that Nintendo simultaneously
furnishes GameTek with a duplicate of all invoices,
packing and shipping documentation relating to such
shipment.
3.4. The purchase price payable to GameTek by
Distributor for each unit of Distributed Product shall be
GameTek's Cost plus (i) the amount of any applicable Third
Party Royalty and (ii) $0.15 (such Third Party Royalty and
$0.15 per unit being referred to as the "GameTek Share").
GameTek's Share shall be payable by Distributor to GameTek
ten (10) days after receipt of such unit by the
Distributor. Transportation from GameTek's warehouse in
the destination country to Distributor or its customers
shall be arranged and paid for by Distributor. GameTek
will cooperate, at Distributor's cost and expense, with
Distributor's efforts to establish agreement with payees
of Third Party Royalties for Distributor's direct payment
of such royalties to such payees
3.5 Distributor shall be responsible, at its
sole cost and expense, for the marketing, promotion and
advertising of each Game Title, including co-operative
advertising credits, shelf or "slot" fees and any similar
discounts, credits or payments, provided that the amount
to be spent thereon and the manner in which such
expenditures shall be made shall be determined exclusively
by Distributor in the exercise of its reasonable business
judgment.
3.6 To the extent that Distributor has paid
the GameTek Share in respect of any game that is
subsequently physically returned by the customer to
Distributor, Distributor shall have the right to recoup
the amount of the GameTek Share previously paid by it to
GameTek in respect of such unit from the GameTek Share
payable in respect of any units sold after such return.
Except to the extent specified herein, the GameTek Share
paid in respect of any unit sold hereunder shall be
non-refundable.
4. PACKAGING, TESTING, ETC.
4.1 GameTek will place the machine, medium and
other operating requirements (such as minimum memory
capacity) on the front outside of each Distributed
Product, and will shrink-wrap all Distributed Product and
will incorporate into the design of the packaging all
relevant bar code information.
4.2. GameTek shall use its reasonable best
efforts to ensure that each Distributed Product shall be
free of Bugs. Each party shall immediately notify the
other party in writing if it discovers any Bugs or other
defects in any Distributed Products.
4.3. All packaging for the Distributed Products
shall contain credit to Distributor as distributor,
GameTek as publisher and to appropriate third parties.
The forms of such credits with respect to Distributor and
GameTek shall be substantially in the forms of such
credits as appear on units of such products as previously
distributed by or for GameTek or as GameTek may otherwise
advise Distributor prior to Distributor's order for such
product. The credits related to such third parties shall
be in such form, substance and scope as to comply with
GameTek's contractual obligations relating thereto.
4.4 All title and other ownership rights to
each Distributed Product incorporating a Game Title shall
vest in Distributor at such time as Distributor shall have
paid to GameTek the full purchase price thereof.
Distributor shall bear the risk of loss of any such
Distributed Product from and after the moment at which
such Distributed Product is shipped from the
manufacturer's facility.
4.5 Distributor shall use its reasonable best
efforts, consistent with standard industry custom and
practice, to sell and to distribute the Distributed
Products throughout the Territory during the Basic Term,
subject to the terms to this Agreement.
5. TERMINATION OF RIGHTS; PAYMENTS.
5.1 All payments owing to GameTek hereunder
shall be made by wire transfer of immediately available
funds to an account specified by GameTek in a notice given
to Distributor at least two (2) business days prior to the
due date of such payment. Unless and to the extent
expressly provided otherwise in this Agreement, each party
hereto shall bear all costs and expenses incurred in
connection with the performance of its obligations
hereunder, without any right of contribution from the
other party hereto.
6. ACCOUNTINGS: RIGHT OF INSPECTION; LATE PAYMENT.
6.1 Distributor shall provide GameTek with an
accounting of all sales of Distributed Product and all
returns credited under Section 3.6 at least quarterly
during the Basic Term and following the end of any sell-off period.
6.2 Distributor shall maintain, throughout the
term of this Agreement and for three years thereafter, at
its principal executive offices complete and accurate
books of account concerning sales of the Distributed
Products hereunder. Upon two business days' prior written
notice, GameTek, or its agents on its behalf, may examine
Distributor's books and records relating to the sale of
the Distributed Products in order to verify the accuracy
thereof, during Distributor's normal business hours;
provided that GameTek may not conduct more than one such
audit in any six month period.
6.3 If Distributor fails or refuses to pay any
amount owing to GameTek hereunder when due, then
Distributor shall reimburse GameTek for any collection
expenses it may incur and the amount not timely paid,
including any such collection expenses, shall bear
interest at a rate per annum equal to 3% over the prime
rate announced from time to time by Citibank, N.A.,
accruing from the first date on which such monies were due
and owing.
7. REPRESENTATIONS AND WARRANTIES:
7.1 Distributor hereby warrants and represents
that:
(i) This Agreement has been duly
authorized, executed and delivered by Distributor;
Distributor has the full power and authority to enter into
this Agreement and to perform its obligations hereunder
and is free to enter into this Agreement; this Agreement
constitutes the valid and binding obligation of
Distributor, enforceable in accordance with its terms; and
the making of this Agreement by Distributor does not
violate any agreement, right or obligation existing
between Distributor on the one hand, and any other person,
firm or corporation, on the other hand;
(ii) No consents of any third parties are
required for Distributor to enter into this Agreement; and
(iii) Distributor shall devote
substantially the same degree of diligence, effort,
resources and care to the performance of its obligations
hereunder as it devotes to the distribution of its
proprietary products or to the performance of its current
contractual obligations to third parties with respect to
similar products.
7.2 GameTek hereby represents and warrants
that:
(i) This Agreement has been duly
authorized, executed and delivered by GameTek; GameTek has
the full power and authority to enter into this Agreement
and to perform its obligations hereunder and is free to
enter into this Agreement; this Agreement constitutes the
valid and binding obligation of GameTek, enforceable in
accordance with its terms; the making of this Agreement by
GameTek does not violate any agreement, right or
obligation existing between GameTek on the one hand, and
any other person, firm or corporation, on the other hand,
nor is any third party consent required for GameTek to
enter into this Agreement; and GameTek has not heretofore
granted such rights to the Game Titles to any other
person, party or company for use in connection with the
Distributed Products;
(ii) Neither the computer software, nor
the documentation incorporated in any Game Title, nor the
Game Title itself distributed by Distributor hereunder, or
any part of any character, object, sound or music embodied
therein infringes or shall infringe upon any common law or
statutory rights of any third party including, without
limitation, contractual rights, patents, copyrights, trade
secrets, rights of privacy, or other intellectual property
rights. The Distributed Products will be free of material
defects in materials and workmanship.
7.3 Distributor shall make no warranties or
representations of any kind with respect to the
Distributed Products to any purchaser end-user thereof,
whether express or implied. To the extent permitted by
applicable law, GameTek's warranty set forth in the last
sentence of Section 7.2(iii) above, is the only warranty,
express or implied, that GameTek will make to any third
party with respect to the Distributed Products (such
warranty to be limited to ninety (90) days from the date
of purchase) and all other implied warranties including
but not limited to the implied warranties of
merchantability and fitness for a particular purpose are
hereby disclaimed. Any product recalls shall be GameTek's
sole responsibility.
8. INDEMNIFICATION; INSURANCE.
8.1 Distributor shall indemnify GameTek, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the "GameTek
Parties") and undertakes to defend the GameTek Parties,
and hold the GameTek Parties harmless from any actions,
claims, suits, proceedings, loss, liability, cost, expense
(including reasonable attorney's fees) or damage suffered
by any of them arising out of or connected in any way with
any acts, omissions by Distributor or its agents in the
performance of its duties hereunder or any breach by
Distributor of its representations, warranties or
agreements herein made, including without limitation the
reasonable costs of any direct claim by GameTek against
Distributor by reason of the foregoing. GameTek shall not
settle any such third party claim or proceeding without
Distributor's prior written consent, which shall not be
unreasonably withheld or delayed. Distributor shall have
the right, at its expense, to participate in the defense
thereof with counsel of its choice, provided further that
GameTek shall have the right at all times, in its sole
discretion, to retain or resume control of the conduct
thereof. Distributor shall provide GameTek with any
assistance that GameTek reasonably requests in connection
therewith.
8.2 GameTek shall indemnify Distributor, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the
"Distributor Parties") and undertakes to defend the
Distributor Parties and hold the Distributor Parties
harmless from any actions, claims, suits, proceedings,
loss, liability, cost, expense (including reasonable
attorney's fees) or damage suffered by any of them arising
out of or connected in any way with any acts, omissions by
GameTek or its agents in the performance of its duties
hereunder or breach by GameTek of its representations,
warranties and agreements herein made, including without
limitation the reasonable costs of any direct claim by
Distributor against GameTek by reason of the foregoing.
Distributor shall promptly notify GameTek of any such
third party claim or proceeding and shall not settle any
such claim without GameTek's prior written consent, which
shall not be unreasonably withheld or delayed. GameTek
shall have the right, at GameTek's expense, to participate
in the defense thereof with counsel of GameTek's choice,
provided that Distributor shall have the right at all
times, in Distributor's sole discretion, to retain or
resume control of the conduct thereof. GameTek shall
provide Distributor with any assistance that Distributor
reasonably requests in connection therewith.
8.3 (a) Distributor shall obtain and maintain
at its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming GameTek as insured in the amount
of at least $1 million per occurrence and $3 million in
the aggregate against any claims, suits, loss or damage
arising out of any personal injury or property damage
arising out of the Distributed Products. Such policy
shall not be subject to cancellation or material amendment
except after thirty (30) days prior written notice to
GameTek. GameTek will be named as an additional insured
on such policy. As proof of such insurance, a fully paid
certificate of insurance will be submitted to GameTek by
Distributor on or before the execution of this Agreement.
(b) GameTek shall obtain and maintain at
its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming Distributor as insured in the
amount of at least $1 million per occurrence and $3
million in the aggregate against any claims, suits, loss
or damage arising out of any personal injury or property
damage. Such policy shall not be subject to cancellation
or material amendment except after thirty (30) days prior
written notice to Distributor. Distributor will be named
as an additional insured on such policy. As proof of such
insurance, a fully paid certificate of insurance will be
submitted to Distributor by GameTek on or before the
execution of this Agreement.
9. EXPIRATION OR TERMINATION OF AGREEMENT:
9.1 In the event that GameTek materially
breaches this Agreement with respect to a Game Title
hereunder and such breach is not cured within thirty (30)
days after receipt of notice from Distributor of such
breach, then, without in any way limiting any of
Distributor's other rights and remedies in such event, and
notwithstanding any provision to the contrary contained
herein, Distributor shall have the right at its sole
election to terminate this Agreement with respect to the
affected Game Title to which GameTek's material breach
relates, upon written notice to GameTek.
9.2 In the event Distributor fails to render
any accounting or pay any monies owing to GameTek
hereunder within ten (10) days of the date on which due
(subject to reasonable events of force majeure), or if
Distributor otherwise materially breaches this Agreement
with respect to a Game Title hereunder and such breach is
not cured within sixty (60) days after receipt of notice
from GameTek of such breach, then without in any way
limiting any of GameTek's other rights and remedies in
such event, and notwithstanding any provision to the
contrary contained herein, GameTek shall have the right at
its sole election to terminate this Agreement.
9.3 If either party to this Agreement files a
petition in bankruptcy or is adjudged a bankrupt, or if a
petition in bankruptcy is filed against such party and is
not dismissed with prejudice within ninety (90) days (the
"bankrupt or insolvent party"), the other party shall have
the right to terminate this Agreement, upon written notice
to the bankrupt or insolvent party.
9.4 Upon any expiration or termination of this
Agreement, all rights granted to Distributor herein shall
immediately revert to GameTek, with the consequences
described below. If the expiration or termination relates
to less than all Game Titles covered hereby, then the
provisions of this Section 10.4 shall relate only to such
affected Game Titles:
(i) Distributor shall continue to satisfy
all of its payment obligations then or at any time
thereafter becoming due and payable;
(ii) GameTek shall thereafter be free to
distribute or authorize others to distribute the affected
Game Titles;
(iii) Distributor shall not thereafter
advertise, distribute or sell Distributed Products
incorporating the affected Game Titles, and will cease all
display, advertising and use of related GameTek Property,
except that Distributor may, if the termination of this
Agreement was not by GameTek as a result of a breach or
default by Distributor, sell off existing inventories of
such Distributed Products in the Territory on a non-exclusive basis
for a period of six (6) months, subject to
all the other terms and conditions hereof. If this
Agreement is terminated by GameTek by reason of a breach
or default by Distributor, the Distributor shall, at
GameTek's option, list all such inventory and provide
GameTek with evidence thereof satisfactory to GameTek, or
ship such inventory (payment to be made by GameTek C.O.D.
on receipt of such shipment) at Distributor's expense to a
location specified by GameTek. Distributor shall deliver
to GameTek a complete and accurate statement indicating
the number, description and whereabouts of all units of
such Distributed Products in Distributor's inventory as of
the date of such expiration of the applicable Exploitation
Period; and
(iv) After the expiration of the above
referenced sell-off period, Distributor shall return to
GameTek all materials furnished to Distributor by GameTek
hereunder with respect to the affected Game Titles or, at
GameTek's election, give evidence satisfactory to GameTek
of their destruction.
9.5 Notwithstanding any contrary provision
contained herein but subject to Distributor's exclusive
rights with respect to Distributed Products in the
Territory during the Basic Term, each of the parties
acknowledges and agrees that during the term of this
Agreement and thereafter each party shall be free to
market, sell, distribute, license or sublicense or
otherwise deal in or exploit any software titles, whether
for use on personal computers or game console systems,
including titles that may be competitive with the Game
Titles, without any liability or obligation to the other
party by reason thereof.
10. NOTICES:
All notices, statements and/or payments to be
given to the parties hereunder shall be addressed to the
parties at the addresses set forth on the first page
hereof or at such other address as the parties shall
designate in writing from time to time. All notices shall
be in writing and shall either be served by personal
delivery (to an officer of each company), mail, or
facsimile (if confirmed by mail or personal delivery of
the hard copy), all charges prepaid. Except as otherwise
provided herein, such notices shall be deemed given when
personally delivered, all charges prepaid, or on the date
five (5) days following the date of mailing, except that
notices of change of address shall be effective only after
the actual receipt thereof. Copies of all notices to
Distributor should be sent to Distributor, Attention:
Office of the President, with a copy to Tenzer Greenblatt,
LLP, 405 Lexington Avenue, New York, New York 10174-0208,
Attention: Barry S. Rutcofsky, Esq. Copies of all
notices to GameTek should be sent to GameTek, Attention:
Office of the President, and to Ackerman, Levine & Cullen,
LLP, 175 Great Neck Road, Great Neck, New York 11021,
Attention: Leslie J. Levine, Esq.
11. MISCELLANEOUS:
11.1 Distributor shall have the right, at its
election, to assign any of its rights or obligations
hereunder, in whole or in part, to any subsidiary,
affiliated, or related company, or to any person, firm or
corporation owning or acquiring all or substantially all
of Distributor's stock or assets, provided that any such
assignment by Distributor shall not relieve Distributor of
its obligations hereunder, and provided further, that the
assignee shall acknowledge to GameTek in writing that such
assignment is subject to, and the assignee agrees to be
bound by, the terms and conditions of this Agreement.
11.2 The entire understanding between the
parties hereto relating to the subject matter hereof is
contained herein. There are no representations,
warranties, terms, conditions, undertakings or collateral
agreements, express or implied, between the parties other
than as expressly set forth in this Agreement. This
Agreement cannot be changed, modified, amended or
terminated except by an instrument in writing executed by
both Distributor and GameTek. The Schedules annexed
hereto constitute a part of this agreement. The headings
and captions used herein are inserted for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement. This Agreement shall
not be deemed effective, final or binding upon Distributor
or GameTek until signed by each of them. Only the final,
executed Agreement is admissible as the written agreement
between the parties and prior drafts, if any,
incorporating revisions or original language may not be
used, and shall not be admissible as evidence for any
purpose in any litigation that may arise between the
parties. This Agreement shall be deemed to have been
drafted by all the parties hereto, since all parties were
assisted by their counsel in reviewing and agreeing
thereto, and no ambiguity shall be resolved against any
party by virtue of its participation in the drafting of
this Agreement.
11.3 No waiver, modification or cancellation of
any term or condition of this Agreement shall be effective
unless executed in writing by the party charged therewith.
No written waiver shall excuse the performance of any act
other than those specifically referred to therein and
shall not be deemed or construed to be a waiver of such
terms or conditions for the future or any subsequent
breach thereof. Except as otherwise provided in this
Agreement, all rights and remedies herein or otherwise
shall be cumulative and none of them shall be in
limitation of any other right or remedy.
11.4 This Agreement does not constitute and
shall not be construed as constituting a partnership,
joint venture, sublicense or agency relationship between
Distributor and GameTek. Neither Distributor nor GameTek
shall have any right to obligate or bind the other in any
manner whatsoever, and nothing herein contained shall give
or is intended to give any rights of any kind to any third
persons.
11.5 Any claim, dispute or disagreement between
the parties arising out of or relating to this Agreement
or the transactions or relationships contemplated hereby
shall be resolved by arbitration under the Commercial
Arbitration Rules of the American Arbitration Association,
as in effect from time to time before a single arbitrator
in New York County, New York. The decision of the
arbitrator shall be in writing, shall include an award of
reasonable attorneys' fees to the prevailing party, and
either party may enter judgment thereon in any court of
competent jurisdiction. Notwithstanding the foregoing, in
the event of any breach or threatened breach by either
party of the provisions of this Agreement, the aggrieved
party may seek and obtain a temporary restraining order,
preliminary injunction or other equitable relief
restraining such breach or threatened breach from any
court of competent jurisdiction.
11.6 This Agreement shall be governed by the
laws of the State of New York applicable to contracts
made to be wholly performed in the State of New York
(without regard to choice of law). Subject to the
provisions of Section 11.5 hereof, any action, suit or
proceeding may be brought in any of the courts of the
State of New York , in New York County, or any of the
federal courts within the Southern District of New York.
Each of the parties hereto irrevocably submits to the
personal jurisdiction of such courts in connection with
any such action, suit or proceeding. In any action, suit
or proceeding arising out of or relating to this Agreement
or the transactions or relationships contemplated hereby
(including any arbitration proceeding) the prevailing
party will be entitled to recover court costs and
reasonable fees of attorneys, accountants and expert
witnesses incurred by such a party in connection with such
action. Any process in any action or proceeding commenced
in such courts may, among other methods, be served upon
GameTek or Distributor, as applicable, by delivering or
mailing the same, via registered or certified mail, return
receipt requested, addressed to GameTek or Distributor, as
applicable, at the addresses set forth in the first page
hereof or such other address as the parties, as
applicable, may designate pursuant to Section 10 hereof.
Any such service by delivery or mail shall be deemed to
have the same force and effect as personal service within
the State of New York.
11.7 Except as may otherwise be provided herein,
neither party shall be deemed to be in breach of any of
its obligations hereunder unless and until it shall have
been given specific written notice by certified or
registered mail, return receipt requested, of the nature
of such breach and it shall have failed to cure such
breach within thirty (30) days (five days in the case of a
payment default) after receipt of such written notice.
11.8 If any provision of this Agreement is or
becomes or is deemed invalid, illegal or unenforceable
under the applicable laws or regulations of any
jurisdiction, such provision will be deemed amended to
conform to such laws or regulations if such amendment can
be effected without materially altering the intention of
the parties; otherwise it shall be stricken and the
remainder of this Agreement shall remain in full force and
effect.
11.9 Wherever the approval or consent of a party
is required hereunder, such approval or consent shall be
in writing and shall not be unreasonably withheld or
delayed.
12. CONFIDENTIAL INFORMATION; NON-SOLICITATION
12.1 Each party hereto shall keep in confidence
and not disclose to any third party, without the written
permission of the other party, the proprietary information
of such other party disclosed under or pursuant to this
Agreement. This requirement of confidentiality shall not
apply to information that is (a) in the public domain
through no wrongful act of the receiving party; (b)
rightfully received by the receiving party from a third
party who is not bound by a restriction of nondisclosure;
(c) already in the receiving party's possession without
restriction as to disclosure; or (d) required to be
disclosed by applicable rules and regulations of
government agencies or judicial bodies. This obligation
of confidentiality shall survive termination of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have
signed this agreement as of the day and year first above
written.
TAKE TWO INTERACTIVE
SOFTWARE, INC.
By: /s/ Ryan A. Brant
--------------------------
Its: Chief Executive Officer
--------------------------
Date: July 29, 1997
-------------------------
GAMETEK, INC.
By: /s/ Robert L. Underwood
-------------------------
Its: Authorized Signer
------------------------
Date: July 29, 1997
-----------------------
[Signature page to GameTek/Take Two Gameboy Distribution
Agreement]
SCHEDULE "A"
TO
GAMEBOY DISTRIBUTION AGREEMENT
Pinball Deluxe
Race Days
Humans
Wheel of Fortune - German Edition
EXHIBIT 10.4
PURSUANT TO RULE 24b.2 PROMULGATED UNDER THE SECURITIES
AND EXCHANGE ACT OF 1934, AS AMENDED, CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR CERTAIN PROVISIONS OF
THIS AGREEMENT. SUCH CONFIDENTIAL INFORMATION HAS BEEN
(i) OMITTED FROM THIS VERSION OF THE AGREEMENT, (ii)
MARKED WITH ASTERISKS (**) TO INDICATE SUCH DELETIONS AND
(iii) FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of July 29, 1997,
between Take Two Interactive Software, Inc., a New York
corporation having offices at 575 Broadway, New York, NY
10012 ("Take Two") and GameTek, Inc., a Delaware
Corporation with offices at 3 Harbor Drive, Suite 110,
Sausalito, California 94965 ("GameTek").
W I T N E S S E T H :
WHEREAS, GameTek owns or controls the rights
in and to the Game Titles (defined below), and desires to
enter into this agreement providing for Take Two's
distribution of Software Devices (defined below)
embodying the Game Titles;
WHEREAS, Take Two is engaged in the business
of distributing, marketing, selling, advertising and
otherwise exploiting Software Devices and desires to
distribute the Software Devices embodying the Game Titles
on the terms provided herein;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS:
Capitalized terms used herein, but not
otherwise defined herein, shall have the meanings set
forth below:
1.1 "Basic Term" means the period commencing
on the date on which such party hereto has executed and
delivered to the other party hereto a copy of this
Agreement, and ending on August 31, 1998; provided,
however, that if GameTek is able to obtain from Califon
Productions, Inc. or its affiliates ("Califon") an
extension of its license for "Wheel of Fortune" and
"Jeopardy!", then the Basic Term shall extend through the
last day of such extension.
1.2 "Bug" means a repeatable phenomenon of
unintended events or actions during the running of a
Software Device under normal conditions that results in:
(a) the software component of such
Software Device being unable to perform repeatedly and
without interruption in the manner in which such Software
Device is commonly intended to be used; or
(b) the destruction or corruption of the
data embodied in such Software Device.
1.3 "Distributed Product" or "Distributed
Products" means Software Devices embodying a Game Title
and playable on the Game Machine.
1.4 "Documentation" means the technical
documentation for each Game.
1.5 "Exploitation Period" with respect to any
Game Title means the date commencing on the date hereof
and ending on the expiration of the Basic Term with
respect to such Game Title.
1.6 "Game Machine" means the Nintendo N64
console game system.
1.7 "Game Title" or "Game Titles" means,
individually or collectively, as the context requires,
the computer software games developed by or on behalf of
GameTek that are set forth on Schedule "A" .
1.8 "Manual" means a document that describes
in reasonable detail in the English language the
operation and functions of the computer software and
contains instructions for using the Distributed Products.
1.9 "SKU" or "sku" means stock keeping unit.
1.10 "Software Device" means any device on or
by which computer software and its associated visual
images, with or without sound, may be embodied or
recorded for later operation, manipulation or
communication to users and which are designed for use
with the Game Machine.
1.11 "Territory" means the world.
1.12 "Third Party Royalties" means, with
respect to any unit of any Game Title distributed by Take
Two hereunder, the aggregate of all royalties payable by
GameTek to Califon Productions, Inc., Vanna White, and
Alex Trebek or their respective successors or assigns in
respect of the sale or other disposition of such unit.
Attached as Schedule A hereto is a description of the
amount of each such Third Party Royalty.
2. RIGHTS AND OBLIGATIONS OF Take Two:
Subject to the terms and conditions hereof,
GameTek hereby grants to Take Two, and Take Two hereby
accepts and agrees to perform and discharge, the
following rights and obligations, which shall be deemed
exclusive within the Territory during the Basic Term:
2.1 Distribution Rights and Obligations.
(a) GameTek hereby engages Take Two, and
Take Two hereby agrees to be engaged by GameTek, as
GameTek's sole and exclusive seller and distributor of
Distributed Products throughout the Territory during the
Exploitation Period. During the Exploitation Period for
each Game Title, Take Two may distribute such Distributed
Products through all available wholesale channels, and
Take Two shall order and maintain inventories of
appropriate quantities of Distributed Products with
respect to each Game Title as shall be reasonably
necessary to meet anticipated demand.
(b) Take Two shall have the right to use,
publish and permit others to use and publish GameTek's
name, and, subject to obtaining the prior approval of the
relevant intellectual property licensor (i.e., Califon
Productions, Inc., Vanna White and Alex Trebek), any
names of or trademarks associated with, or embodied in,
any Game Title or reproduction or simulation thereof, the
script, speech, images, characters, characterizations,
designs, graphics, art work and other characteristics
(including the name, voice and likeness of Vanna White
and Alex Trebek) associated with each Game Title, and
the name of each Game Title (collectively, the "Marks"),
in connection with the sale, advertising, distribution
and exploitation thereof.
(c) Take Two shall have the right, solely
for advertising, publicity and promotional purposes, to
perform and display the Distributed Products publicly,
and to permit the public performance thereof, but only in
a manner consistent with ordinary custom and practice in
the industry for the promotion of products similar to the
Game Titles.
(d) GameTek shall furnish to Take Two in
camera ready form, and Take Two shall have the right to
use, all artwork, textual material and other materials
prepared by GameTek in connection with the Distributed
Products, including advertising, packaging and wrapping
materials (collectively, "Packaging and Promotional
Materials"), to the extent created by or on behalf of
GameTek in connection with Distributed Products.
(e) All rights in and to the Game Titles,
Packaging and Promotional Materials and/or Marks not
expressly granted to Take Two herein are reserved to
GameTek.
2.2 Intellectual Property Rights.
(a) As between GameTek and Take Two,
GameTek retains all copyright, patent, trade secret,
trade mark and trade name rights in and to the
Distributed Products, including all packaging, designs,
logos, slogans, advertising materials and promotional
materials and in all other materials delivered by GameTek
to Take Two (collectively, "GameTek Property"), and Take
Two will not have or acquire any right, title or interest
therein or thereto under any circumstance whatsoever
except for the specific rights granted herein. Take Two
shall not, during the Basic Term or at any time
thereafter, take any action that attacks, or that
otherwise reasonably may be expected to adversely affect
or derogate from, GameTek's ownership of or rights in the
GameTek Property or the validity thereof, nor shall Take
Two apply for any registration or file any document or
take any action that would adversely affect GameTek's
ownership of or rights in the GameTek Property or aid or
abet anyone else in doing so, or use or authorize the use
of any trademark, trade name or word, symbol or
combination thereof or other designation identical with
or confusingly similar to the trademarks and/or trade
names that constitute part of the GameTek Property. Take
Two will not alter, remove, obscure, erase or deface any
proprietary rights notices contained on or incorporated
in any SKU or the packaging of any SKU. If Take Two is
called upon or required to produce any packaging,
advertising and promotional materials for a Game Title,
Take Two will include thereon such proprietary rights
notices as may be designated and approved by GameTek.
(b) Promptly upon request, Take Two will
provide GameTek with a template for Take Two's logo and
legend for inclusion on any packaging, advertising, game
manuals or promotional materials produced in connection
with any Game Title, which template shall be reasonably
acceptable to GameTek. GameTek will include Take Two's
logo and legend, as incorporated in any such approved
template, on all such packaging, advertising and
promotional materials with respect to Game Titles. Prior
to the use of any such materials, GameTek will provide
samples thereof to Take Two for Take Two approval, which
shall not be unreasonably withheld or delayed. Such
materials will be deemed approved by Take Two unless,
within fifteen (15) days following the submission thereof
to Take Two, Take Two shall notify GameTek in writing of
any objection it may have thereto, specifying the reasons
for such objection in reasonable detail and describing
how such objections may be remedied in order to render
the submitted materials acceptable to Take Two.
3. MANUFACTURING; PRICING.
3.1 GameTek represents that, prior to the
delivery of any Game Title hereunder, it shall have
designed the computer software and all documentation
relating to such Game Title, to the extent necessary for
same to be manufactured into Distributed Products and
distributed by Take Two pursuant to this Agreement, and
operated and perceived through the Game Machines. The
Distributed Products shall consist of standard four (4)
megabyte cartridges.
3.2 Take Two shall notify GameTek from time to
time reasonably in advance of any required delivery date
of the number of units that Take Two wishes GameTek to
have manufactured in order to enable Take Two to fulfill
its distribution requirements for each Game Title. Each
such notification shall be accompanied by (i) a wire
transfer of funds, either (at Take Two's option) to an
account designated by GameTek or directly to Nintendo of
America ("Nintendo") on behalf of GameTek, sufficient to
enable GameTek to pay for the manufacture of the
Distributed Products so ordered or, if requested by
GameTek, (ii) the provision of an irrevocable documentary
letter of credit in favor of Nintendo on behalf of
GameTek in form satisfactory to Nintendo, for the full
amount of the manufacturing cost of the goods ordered.
In any event, Take Two shall arrange and pay for shipment
of the goods from Japan (including all customs duties and
similar charges) and for insuring the goods through
delivery to Take Two or its customers, as applicable.
Promptly and in no event later than two (2) business days
after its receipt of such order and funds or letter of
credit, GameTek shall arrange with Nintendo for the
manufacture of such Distributed Products, including the
posting of requisite letters of credit in favor of the
manufacturer.
3.3 GameTek shall deliver to Nintendo the
preliminary and final code for each Game Title in
accordance with the delivery schedule set forth in
Schedule "A" annexed hereto and shall use its reasonable
best efforts to obtain in a timely manner all necessary
approvals from Nintendo.
3.4. The purchase price payable by Take Two
hereunder for each unit of Distributed Product shall be
the sum of (i) the total cost charged to GameTek by
Nintendo for the manufacture of the product, plus (ii) to
the extent not included in (i) above or otherwise paid by
Take Two directly, all insurance and transportation
charges, import duties, custom fees and similar charges
incurred in shipping the unit into its warehouse in the
United States, (the sum of the amounts described in
clauses (i) and (ii) being referred to collectively as
"GameTek's Cost of Goods") plus (iii) all Third Party
Royalties payable in respect of the sale or other
disposition of such unit, plus (iv) $(**) (such $(**) per
unit being referred to as the "GameTek Share").
Transportation to Take Two or its customers shall be
arranged and paid for by Take Two. The portion of the
purchase price constituting GameTek's Cost of Goods shall
be paid by Take Two as provided in Section 3.2 hereof.
The portion of such purchase price consisting of Third-Party Royalties
shall be paid by Take Two to GameTek
within thirty days after the end of each calendar month
by wire transfer of immediately available funds into an
account designated by GameTek in writing to Take Two
commencing with the first sale by Take Two of Distributed
Products. GameTek's Share in respect of any of the first
(**) units sold hereunder shall be payable in accordance
with the payment schedule set forth in Section 5.1(a).
GameTek's Share in respect of any units in excess of (**)
units shall only accrue and become payable upon (i) the
collection by Take Two of all receivables from the sale
of at least (**) and (ii) upon collection of the proceeds
of sale of the relevant units in excess of (**). Payment
of GameTek's Share with respect to units in excess of
(**) shall be made within 30 days of the close of the
month in which the GameTek Share is earned with respect
to such units. Notwithstanding the foregoing, in the
event that the Guaranty (as hereinafter defined) is
reduced pursuant to the provisions of Sections 5.1(a) or
(c) hereof, the (**) units referred to above in this
paragraph shall be proportionately reduced.
3.5 Take Two shall be responsible, at its sole
cost and expense, for the marketing, promotion and
advertising of each Game Title, including co-operative
advertising credits, shelf or "slot" fees and any similar
discounts, credits or payments, provided that the amount
to be spent thereon and the manner in which such
expenditures shall be made shall be determined
exclusively by Take Two in the exercise of its reasonable
business judgment.
3.6 If any customer returns a unit on which
Take Two has paid the GameTek Share (including returns
for defects or "Bugs"), then Take Two shall have the right
to recoup the amount of the GameTek Share and the Third
Party Royalties previously paid by Take Two in respect of
such unit from any other monies payable to GameTek
hereunder. Except as otherwise provided in Section 7.4
hereof, if Take Two grants any customer price protection
or a markdown of inventory in respect of any Distributed
Product, an amount equal to 50% of the dollar value of
any such price protection or markdown of inventory
actually granted to such customer will be recoupable by
Take Two out of monies otherwise payable to GameTek
hereunder if, but only if, GameTek has authorized such
price protection or markdown in a writing that specifies
the account name, inventory quantity to be adjusted in
price, and the per unit and aggregate price adjustment
being authorized. GameTek shall not unreasonably
withhold or delay its consent to any such price
protection or mark down. If and to the extent Take Two
is unable to recoup any amounts owing by GameTek by
reason of the provisions of this Section 3.6 within
ninety (90) days after such amount first becomes due,
then Take Two may notify GameTek of such fact and demand
that GameTek pay the unrecouped amount. GameTek shall
pay such unrecouped amount promptly after receipt of such
demand for payment, but only to the extent that such
payment does not reduce the aggregate amount of the
GameTek Share received and retained by GameTek hereunder
to below $(**) (or such lesser amount to which the
Guaranty may reduced as provided in Sections 5.1(a) and
(c) hereof). For purposes of clarity, it is the express
intention of the parties that returns, price protection
and markdowns shall not reduce the aggregate amount of
the GameTek Share paid to and retained by GameTek in
respect of the Guaranty to less than $(**) (or such
lesser amount to which the Guaranty may be reduced as
provided in Sections 5.1(a) (c) hereof).
4. PACKAGING, TESTING, ETC.:TRANSLATIONS
4.1 GameTek will place the game machine,
medium and other operating requirements (such as minimum
memory capacity) on the front outside of each Distributed
Product, and will shrink-wrap all Distributed Product and
will incorporate into the design of the packaging all
relevant bar code information.
4.2. GameTek shall use its reasonable best
efforts to ensure that each Distributed Product shall, in
each different configuration in which such Distributed
Product is to operate, be free of Bugs or other defects.
GameTek shall be fully responsible for implementing all
necessary corrective measures to correct any Bugs or
other defects found to exist. Each party shall
immediately notify the other party in writing if it
discovers any Bugs or other defects in any Distributed
Products.
4.3. All packaging for the Distributed
Products shall contain credit to Take Two or its
affiliates as distributor, GameTek as publisher and to
appropriate third parties. The forms of such credits
with respect to Take Two and GameTek shall be
substantially in the forms annexed hereto in Schedule
"B". The credits related to such third parties shall be
in such form, substance and scope as to comply with
GameTek's contractual obligations relating thereto.
4.4 All title and other ownership rights to
each Distributed Product incorporating a Game Title shall
vest in Take Two at such time as the goods are delivered
for shipment by the manufacturer. GameTek shall retain a
security interest in the goods until Take Two shall have
paid to GameTek the full purchase price thereof. Take
Two shall bear the risk of loss of any such Distributed
Product from and after the moment at which such
Distributed Product is shipped from the manufacturer's
facility.
4.5 Take Two shall use its reasonable best
efforts, consistent with standard industry custom and
practice, to sell and to distribute the Distributed
Products throughout the Territory during the Basic Term,
subject to the terms to this Agreement.
4.6 All advertising, packaging and marketing
and promotional materials proposed to be used by Take Two
in connection with any of the Game Titles shall be
submitted to GameTek for its written approval prior to
any use or distribution thereof. GameTek shall be deemed
to have approved any materials so submitted unless,
within thirty (30) days following its receipt thereof,
GameTek delivers to Take Two a written objection to the
submitted materials specifying in reasonable detail the
nature of such objection and the manner in which the
submitted material must be changed in order to meet
GameTek's approval.
4.7 Upon request by Take Two, GameTek shall
prepare translated versions of one or both Game Titles.
With respect to any such translation request, Take Two
shall, at its own cost, provide GameTek with a complete
and accurate translation of the text of the Game Title
(including all relevant documentation) into the selected
language, and GameTek shall insert such translated text
into the Game Title within thirty (30) days after its
receipt thereof from Take Two. The foreign language
version of the text for each screen shot within any Game
Title must be close enough to the length of the English
version of such text to enable it to fit within the same
text window as the English text. The parties shall agree
on the fee that GameTek will charge and that Take Two
will pay for including such translated text into the Game
Title and related documentation prior to the delivery of
the translated text to GameTek. If the parties cannot
agree on a fee for such services, GameTek shall charge
$40.00 per hour for each man hour expended is performing
such services.
5. GUARANTEES AND ADVANCES.
5.1 Guarantees Payable by Take Two.
(a) Take Two guarantees to GameTek a
minimum aggregate GameTek Share of $(**) (the "Guaranty")
with respect to the first two Game Titles released
hereunder (subject to possible reduction in the manner
and to the extent described below). The Guaranty shall
be payable in the manner described below:
(i) $(**) payable upon execution and
delivery of this Agreement;
(ii) $(**) payable within three
business days after delivery to Take Two of written
notice of final code approval from Nintendo of Japan,
Inc. for "Wheel of Fortune" game cartridge;
(iii) $(**) payable within three
business days after the first commercial shipment from
the manufacturer of "Wheel of Fortune" game cartridges;
(iv) $(**) payable within three
business days after delivery to Take Two of written
notice of final code approval from Nintendo of Japan,
Inc. for "Jeopardy!" game cartridge;
(v)$(**) payable within three
business days after the first commercial shipment from
the manufacturer of "Jeopardy!" game cartridges;
(vi)$(**) payable within one hundred
twenty (120) days after first shipment of the second Game
Title released hereunder;
(vii)$(**) payable within two hundred
forty (240) days after first shipment of the second Game
Title released hereunder; and
(viii)$(**) payable within three
hundred sixty (360) days after first shipment of the
second Game Title released hereunder;
provided, however, that if for any reason GameTek is
unable to obtain from Califon an extension of its
existing license for "Wheel of Fortune" and "Jeopardy!"
beyond August 31, 1998, then Take Two shall have no
obligation to make the milestone payments described in
clauses (vi), (vii) and (viii) above, and the aggregate
Guaranty payable by Take Two hereunder shall be reduced
from $(**) to $(**), the foregoing being Take Two's sole
remedy hereunder for any failure by GameTek to obtain
such license extension.
All payments made hereunder shall be made by wire
transfer of immediately available funds to an account
which GameTek shall designate at least two full business
days prior to the due date of any relevant payment.
(b) Notwithstanding any contrary provision
contained herein, (i) Take Two shall be entitled to
recoup out of the GameTek Share otherwise payable to
GameTek in respect of any Game Title covered hereunder,
on a fully cross-collateralized basis, the full amount of
the advance Guaranty payments theretofore paid by Take
Two to GameTek pursuant to Section 5.1(a) above, and
(ii) to the extent that Take Two furnishes GameTek with
documentation evidencing the fact that Take Two has
incurred more than $150,000 in advertising, marketing,
promotion and sales support for the Game Titles, Take Two
may recoup up to $(**) of such costs in excess of
$150,000 from the GameTek Share otherwise payable to
GameTek in respect of the first (**) units of Distributed
Product sold or distributed by Take Two hereunder in
excess of the Guaranty (i.e., units (**) through (**);
provided that such numbers shall be proportionately
reduced if the Guaranty is reduced pursuant to the
provisions of Sections 5.1(a) or (c) hereof).
(c) If GameTek (i) is unable to obtain from
Califon an extension of its existing license beyond
August 31, 1998, and (ii) does not deliver the notice of
final code approval for the "Wheel of Fortune" game
cartridge and/or the "Jeopardy!" game cartridge by the
dates specified in Schedule "A" annexed hereto, then for
each and every month or partial month that delivery of
either such approval notice is delayed beyond the date
specified in Schedule "A," the amount payable by Take Two
upon delivery of such notice shall be decreased by
$100,000, provided that the aggregate amount of such
decrease occasioned by the late delivery of either such
notice shall not exceed the amount specified in Schedule
"A" as payable upon delivery of such notice.
(d) If GameTek does not deliver the notice of
final code approval for either the "Wheel of Fortune"
game cartridge or the "Jeopardy!" game cartridge within
ninety (90) of the delivery date specified in Schedule
"A" annexed hereto, then Take Two shall have the option
on written notice to GameTek to delete such Game Title
from this Agreement without GameTek being in default as a
result thereof, and GameTek shall, within ten (10)
business days of such notice, refund to Take Two all
amounts paid by Take Two to GameTek in respect of the
Game Title so deleted. Notwithstanding the foregoing, if
GameTek's rights with respect to any Game Title terminate
prior to the end of the Exploitation Period therefor as a
result of a failure by GameTek to comply with its
obligations under any agreement with respect thereto,
Take Two shall have the right to perform or cause to be
performed such obligations, and the reasonable out-of-pocket
expenses incurred by Take Two in connection
therewith (to the extent such expenses exceed amounts
that otherwise would have been payable by Take Two
hereunder with respect to such Game Title) shall be
recoupable by Take Two out of funds otherwise payable to
GameTek hereunder on a fully cross-collateralized basis,
or at Take Two's election, paid directly by GameTek with
thirty days after receipt of Take Two's invoice therefor.
5.2 Unless and to the extent expressly
provided otherwise in this Agreement, each party hereto
shall bear all costs and expenses incurred in connection
with the performance of its obligations hereunder,
without any right of contribution from the other party
hereto.
6. RIGHT OF INSPECTION; LATE PAYMENT.
6.1 Each party shall maintain, throughout the
term of this Agreement and for three years thereafter, at
its principal executive offices complete and accurate
books of account concerning sales of the Distributed
Products hereunder. Upon five business days' prior
written notice, either party hereto, or its agents on its
behalf, may examine the other party's books and records
relating to the sale of the Distributed Products in order
to verify the accuracy thereof, during normal business
hours, and upon reasonable prior written notice; provided
that neither party may conduct more than one such audit
in any six month period.
6.2 If either party fails or refuses to pay
any amount owing to the other party hereunder when due,
then the party in default shall reimburse the other party
for any collection expenses it may incur and the amount
not timely paid, including any such collection expenses,
shall bear interest at a rate per annum equal to 3% over
the prime rate announced from time to time by Citibank,
N.A., accruing from the first date on which such monies
were due and owing.
7. REPRESENTATIONS AND WARRANTIES:
7.1 Take Two hereby warrants and represents
that:
(i) This Agreement has been duly
authorized, executed and delivered by Take Two; Take Two
has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is
free to enter into this Agreement; this Agreement
constitutes the valid and binding obligation of Take Two,
enforceable in accordance with its terms; and the making
of this Agreement by Take Two does not violate any
agreement, right or obligation existing between Take Two
on the one hand, and any other person, firm or
corporation, on the other hand;
(ii) No consents of any third parties are
required for Take Two to enter into this Agreement; and
(iii) Take Two shall devote substantially
the same degree of diligence, effort, resources and care
to the performance of its obligations hereunder as it
devotes to the distribution of its proprietary products
or to the performance of its current contractual
obligations to third parties with respect to similar
products.
7.2 GameTek hereby represents and warrants
that:
(i) This Agreement has been duly
authorized, executed and delivered by GameTek; GameTek
has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is
free to enter into this Agreement; this Agreement
constitutes the valid and binding obligation of GameTek,
enforceable in accordance with its terms; the making of
this Agreement by GameTek does not violate any agreement,
right or obligation existing between GameTek on the one
hand, and any other person, firm or corporation, on the
other hand; and GameTek has not heretofore granted such
rights to the Game Titles to any other person, party or
company for use in connection with the Distributed
Products;
(ii) Neither the computer software, nor
the documentation incorporated in any Game Title, nor the
Game Title itself distributed by Take Two hereunder, or
any part of any character, object, sound or music
embodied therein infringes or shall infringe upon any
common law or statutory rights of any third party
including, without limitation, contractual rights,
patents, copyrights, trade secrets, rights of privacy, or
other intellectual property rights. The Distributed
Products will be free of material defects in materials
and workmanship;
(iii) GameTek shall keep Take Two
apprised of any material changes to the delivery dates
set forth in Schedule "A" annexed hereto;
(iv) There are no royalties payable to
any third parties in respect of the Game Titles other
than those specified in Schedule "A" annexed hereto.
7.3 Take Two shall make no warranties or
representations of any kind with respect to the
Distributed Products to any purchaser end-user thereof,
whether express or implied. To the extent permitted by
applicable law, GameTek's warranty set forth in the last
sentence of Section 7.2(iii) above, is the only warranty,
express or implied, that GameTek will make to any third
party with respect to the Distributed Products (such
warranty to be limited to ninety (90) days from the date
of purchase by the end-user) and all implied warranties
including but not limited to the implied warranties of
merchantability and fitness for a particular purpose are
hereby disclaimed. Any product recalls shall be
GameTek's sole responsibility.
7.4 (a) WalMart, Inc. ("WalMart") has claimed
that it is entitled to in excess of $400,000 in credits
from GameTek for price protection, returns, stock
balancing and the like. GameTek disputes that it owes
WalMart such amount and has requested that WalMart
furnish it with documentation establishing its rights to
all or any part of such amount. GameTek and WalMart have
agreed that, to the extent WalMart establishes its
entitlement to any part of such amount through
documentation that is satisfactory to GameTek (such
demonstrated and agreed credit, the "WalMart Agreed
Credit"), WalMart shall recoup the WalMart Agreed Credit
solely by taking a 10% discount off the invoiced price of
any GameTek product subsequently purchased by WalMart
from GameTek. Take Two shall not offer any such discount
on GameTek products that it sells to WalMart nor shall it
solicit or encourage a request by WalMart for any such
discount in connection with sales made by Take Two to
WalMart hereunder. If, however, WalMart demands such a
discount on product purchased by it from Take Two
hereunder without any such offer, solicitation or
encouragement by Take Two, then Take Two may grant
WalMart a 10% discount on the invoiced price of any
Distributed Products sold to WalMart hereunder and may
recoup the full amount of such discount from amounts
otherwise payable to GameTek hereunder; provided that in
no event may Take Two recoup from GameTek under this
Section 7.4(a), in the aggregate, more than the total
amount of the WalMart Agreed Credit.
(b) Toys "R" Us, Inc. ("Toys") has claimed that
it is entitled to approximately $250,000 in credits from
GameTek for price protection, returns, stock balancing
and the like. GameTek and Toys have agreed that Toys
shall recoup the full amount of such credit (the "Toys
Agreed Credit") solely by taking a 10% discount off the
invoiced price of any GameTek product subsequently
purchased by Toys from GameTek. Take Two shall not offer
any such discount on GameTek products that it sells to
Toys nor shall it solicit or encourage a request by Toys
for any such discount in connection with sales made by
Take Two to Toys hereunder. If, however, Toys demands
such a discount on product purchased by it from Take Two
hereunder without any such offer, solicitation or
encouragement by Take Two, then Take Two may grant Toys a
10% discount on the invoiced price of any Distributed
Products sold to Toys hereunder and may recoup the full
amount of such discount from amounts otherwise payable to
GameTek hereunder; provided that in no event may Take Two
recoup from GameTek under this Section 7.4(b), in the
aggregate, more than the total amount of the Toys Agreed
Credit.
8. INDEMNIFICATION; INSURANCE.
8.1 Take Two shall indemnify GameTek, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the "GameTek
Parties") and undertakes to defend the GameTek Parties,
and hold the GameTek Parties harmless from any actions,
claims, suits, proceedings, loss, liability, cost,
expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in
any way with any acts, omissions or misrepresentations by
Take Two that constitute a breach of this Agreement by
Take Two or any breach by Take Two of its
representations, warranties or agreements herein made,
including without limitation the reasonable costs of any
direct claim by GameTek against Take Two by reason of the
foregoing. GameTek shall not settle any such third party
claim or proceeding without Take Two's prior written
consent, which shall not be unreasonably withheld or
delayed. Take Two shall have the right, at its expense,
to participate in the defense thereof with counsel of its
choice, provided further that GameTek shall have the
right at all times, in its sole discretion, to retain or
resume control of the conduct thereof. Take Two shall
provide GameTek with any assistance that GameTek
reasonably requests in connection therewith at GameTek's
cost.
8.2 GameTek shall indemnify Take Two, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the "Take Two
Parties") and undertakes to defend the Take Two Parties
and hold the Take Two Parties harmless from any actions,
claims, suits, proceedings, loss, liability, cost,
expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in
any way with any acts, omissions or misrepresentations by
GameTek that constitute a breach of this Agreement by
GameTek or any breach by GameTek of its representations,
warranties and agreements herein made, including without
limitation the reasonable costs of any direct claim by
Take Two against GameTek by reason of the foregoing.
Take Two shall promptly notify GameTek of any such third
party claim or proceeding and shall not settle any such
claim without GameTek's prior written consent, which
shall not be unreasonably withheld or delayed. GameTek
shall have the right, at GameTek's expense, to
participate in the defense thereof with counsel of
GameTek's choice, provided that Take Two shall have the
right at all times, in Take Two's sole discretion, to
retain or resume control of the conduct thereof. GameTek
shall provide Take Two with any assistance that Take Two
reasonably requests in connection therewith at Take Two's
cost.
8.3 (a) Take Two shall obtain and maintain at
its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming GameTek as insured in the amount
of at least $1 million per occurrence and $2 million in
the aggregate against any claims, suits, loss or damage
arising out of any personal injury or property damage
arising out of the Distributed Products. Such policy
shall not be subject to cancellation or material
amendment except after thirty (30) days prior written
notice to GameTek. GameTek will be named as an
additional insured on such policy. As proof of such
insurance, a fully paid certificate of insurance will be
submitted to GameTek by Take Two on or before approval by
Nintendo of Japan, Inc. of the final code for the first
Game Title released hereunder.
(b) GameTek shall obtain and maintain at
its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming Take Two as insured in the
amount of at least $1 million per occurrence and $2
million in the aggregate against any claims, suits, loss
or damage arising out of any personal injury or property
damage. Such policy shall not be subject to cancellation
or material amendment except after thirty (30) days prior
written notice to Take Two. Take Two will be named as an
additional insured on such policy. As proof of such
insurance, a fully paid certificate of insurance will be
submitted to Take Two by GameTek on or before the
execution of this Agreement approval by Nintendo of
Japan, Inc. of the final code for the first Game Title
released hereunder.
9. EXPIRATION OR TERMINATION OF AGREEMENT:
9.1 In the event that GameTek materially
breaches this Agreement with respect to a Game Title
hereunder and such breach is not cured within thirty (30)
days after receipt of notice from Take Two of such breach
(in the case of any delay in receipt of final code
approval from Nintendo for any Game Title, GameTek shall
not be deemed to be in breach until the ninety (90) day
period referred to in Section 5.1(d) has expired;
however, GameTek shall have no further cure rights with
respect thereto), then, without in any way limiting any
of Take Two's other rights and remedies in such event,
and notwithstanding any provision to the contrary
contained herein, Take Two shall have the right at its
sole election to terminate this Agreement with respect to
the affected Game Title to which GameTek's material
breach relates, upon written notice to GameTek (the
"Termination Notice"). In such event, and without in any
way limiting any of Take Two's rights and remedies, and
notwithstanding any provision to the contrary contained
herein, but only with respect to the affected Game Title
which is the subject of the Termination Notice, GameTek
shall pay to Take Two an amount equal to any unrecouped
portion of the Guaranty allocable to such Game Title (as
set forth on Schedule "A") and theretofore paid by Take
Two to GameTek hereunder. All such amounts as described
above may be deducted from payments to be made to GameTek
hereunder, or Take Two shall have the option to require
that GameTek repay to Take Two any such amount owed
pursuant hereto, which GameTek shall do within thirty
(30) days following Take Two's written request therefor.
In addition, if so requested by Take Two, GameTek shall
purchase from Take Two all remaining inventory with
respect to the affected Game Title at Take Two's cost,
and Take Two shall deliver such inventory to a location
or locations designated by GameTek upon Take Two's
receipt of such purchase price. Payment of any amount
owing to Take Two hereunder shall be made within thirty
(30) days of Take Two's invoice therefor.
9.2 In the event Take Two fails to render any
accounting or pay any monies owing to GameTek hereunder
or if Take Two otherwise materially breaches this
Agreement with respect to a Game Title hereunder and such
breach is not cured within thirty (30) days (in the case
of a payment default, within two (2) business days after
notice of default) after receipt of notice from GameTek
of such breach, then without in any way limiting any of
GameTek's other rights and remedies in such event, and
notwithstanding any provision to the contrary contained
herein, GameTek shall have the right at its sole election
to terminate this Agreement.
9.3 If either party to this Agreement files a
petition in bankruptcy or is adjudged a bankrupt, or if a
petition in bankruptcy is filed against such party and is
not dismissed with prejudice within sixty (60) days (the
"bankrupt or insolvent party"), the other party shall
have the right to terminate this Agreement, upon written
notice to the bankrupt or insolvent party.
9.4 Upon any expiration or termination of this
Agreement, all rights granted to Take Two herein shall
immediately revert to GameTek, with the consequences
described below. If the expiration or termination
relates to less than all Game Titles covered hereby, then
the provisions of this Section 9.4 shall relate only to
such affected Game Titles:
(i) Take Two shall continue to satisfy
all of its payment obligations then or at any time
thereafter becoming due and payable;
(ii) GameTek shall thereafter be free to
distribute or authorize others to distribute the affected
Game Titles;
(iii) Take Two shall not thereafter
advertise, distribute or sell Distributed Products
incorporating the affected Game Titles, and will cease
all display, advertising and use of related GameTek
Property, except that Take Two may, if the termination of
this Agreement was not by GameTek as a result of a breach
or default by Take Two, sell off existing inventories of
such Distributed Products in the Territory on a non-exclusive
basis for a period of six (6) months (which is
equal to the length of the sell-off period granted to
GameTek under its licenses with Califon Productions,
Inc.), subject to all the other terms and conditions
hereof. If this Agreement is terminated by GameTek by
reason of a breach or default by Take Two, then Take Two
shall, at GameTek's request ship such inventory at Take
Two's expense to GameTek's California warehouse promptly
upon Take Two's receipt of payment by GameTek of Take
Two's manufacturing cost for such inventory. In any
case, Take Two shall, within ten (10) business days after
any expiration or termination of the Exploitation Period
for any Game Title, deliver to GameTek a complete and
accurate statement indicating the number, description and
whereabouts of all units of Distributed Products relating
to such Game Title that are in Take Two's inventory as of
the date of such expiration or termination of the
applicable Exploitation Period; and
(iv) Take Two shall return to GameTek all
materials furnished to Take Two by GameTek hereunder with
respect to the affected Game Titles or give evidence
satisfactory to GameTek of their destruction.
9.5 Notwithstanding any contrary provision
contained herein but subject to Take Two's exclusive
rights with respect to Distributed Products in the
Territory during the Basic Term, each of the parties
acknowledges and agrees that during the term of this
Agreement and thereafter each party shall be free to
market, sell, distribute, license or sublicense or
otherwise deal in or exploit any software titles, whether
for use on personal computers or game console systems,
including titles that may be competitive with the Game
Titles, without any liability or obligation to the other
party by reason thereof.
10. NOTICES:
All notices, statements and/or payments to be
given to the parties hereunder shall be addressed to the
parties at the addresses set forth on the first page
hereof or at such other address as the parties shall
designate in writing from time to time. All notices
shall be in writing and shall either be served by
personal delivery (to an officer of each company), mail,
or facsimile (if confirmed by mail or personal delivery
of the hard copy), all charges prepaid. Except as
otherwise provided herein, such notices shall be deemed
given when personally delivered, all charges prepaid, or
on the date five (5) days following the date of mailing,
except that notices of change of address shall be
effective only after the actual receipt thereof. Copies
of all notices to Take Two should be sent to Take Two,
Attention: Office of the President, with a copy to Gibson
Dunn & Crutcher, LLP, 2029 Century Park East, Suite 4000,
Los Angeles, California 90067, Attention: Don Parris,
Esq. Copies of all notices to GameTek should be sent to
GameTek, Attention: Office of the President, and to
Ackerman, Levine & Cullen, LLP, 175 Great Neck Road,
Great Neck, New York 11021, Attention: John M. Gaioni,
Esq.
11. MISCELLANEOUS:
11.1 Take Two shall have the right, at its
election, to assign any of its rights or obligations
hereunder, in whole or in part, to any subsidiary,
affiliated, or related company, or to any person, firm or
corporation owning or acquiring all or substantially all
of Take Two's stock or assets, provided that any such
assignment by Take Two shall not relieve Take Two of its
obligations hereunder, and provided further, that the
assignee shall acknowledge to GameTek in writing that
such assignment is subject to, and the assignee agrees to
be bound by, the terms and conditions of this Agreement.
11.2 The entire understanding between the
parties hereto relating to the subject matter hereof is
contained herein. There are no representations,
warranties, terms, conditions, undertakings or collateral
agreements, express or implied, between the parties other
than as expressly set forth in this Agreement. This
Agreement cannot be changed, modified, amended or
terminated except by an instrument in writing executed by
both Take Two and GameTek. The Schedules annexed hereto
constitute a part of this agreement. The headings and
captions used herein are inserted for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement. This Agreement shall
not be deemed effective, final or binding upon Take Two
or GameTek until signed by each of them. Only the final,
executed Agreement is admissible as the written agreement
between the parties and prior drafts, if any,
incorporating revisions or original language may not be
used, and shall not be admissible as evidence for any
purpose in any litigation that may arise between the
parties. This Agreement shall be deemed to have been
drafted by all the parties hereto, since all parties were
assisted by their counsel in reviewing and agreeing
thereto, and no ambiguity shall be resolved against any
party by virtue of its participation in the drafting of
this Agreement.
11.3 No waiver, modification or cancellation of
any term or condition of this Agreement shall be
effective unless executed in writing by the party charged
therewith. No written waiver shall excuse the
performance of any act other than those specifically
referred to therein and shall not be deemed or construed
to be a waiver of such terms or conditions for the future
or any subsequent breach thereof. Except as otherwise
provided in this Agreement, all rights and remedies
herein or otherwise shall be cumulative and none of them
shall be in limitation of any other right or remedy.
11.4 This Agreement does not constitute and
shall not be construed as constituting a partnership,
joint venture, sublicense or agency relationship between
Take Two and GameTek. Neither Take Two nor GameTek shall
have any right to obligate or bind the other in any
manner whatsoever, and nothing herein contained shall
give or is intended to give any rights of any kind to any
third persons.
11.5 Any claim, dispute or disagreement between
the parties arising out of or relating to this Agreement
or the transactions or relationships contemplated hereby
shall be resolved by arbitration under the Commercial
Arbitration Rules of the American Arbitration
Association, as in effect from time to time before a
single arbitrator in New York City, New York. The
decision of the arbitrator shall be in writing, shall
include an award of reasonable attorneys' fees to the
prevailing party, and either party may enter judgment
thereon in any court of competent jurisdiction.
Notwithstanding the foregoing, in the event of any breach
or threatened breach by either party of the provisions of
this Agreement, the aggrieved party may seek and obtain a
temporary restraining order, preliminary injunction or
other equitable relief restraining such breach or
threatened breach from any court of competent
jurisdiction.
11.6 This Agreement shall be governed by the
laws of the State of New York applicable to contracts
made to be wholly performed in the State of New York
(without regard to choice of law). Subject to the
provisions of Section 11.5 hereof, any action, suit or
proceeding may be brought in any of the courts of the
State of New York , in New York City, New York, or any of
the federal courts within the Southern District of New
York. Each of the parties hereto irrevocably submits to
the personal jurisdiction of such courts in connection
with any such action, suit or proceeding. In any action,
suit or proceeding arising out of or relating to this
Agreement or the transactions or relationships
contemplated hereby (including any arbitration
proceeding) the prevailing party will be entitled to
recover court costs and reasonable fees of attorneys,
accountants and expert witnesses incurred by such a party
in connection with such action. Any process in any
action or proceeding commenced in such courts may, among
other methods, be served upon GameTek or Take Two, as
applicable, by delivering or mailing the same, via
registered or certified mail, return receipt requested,
addressed to GameTek or Take Two, as applicable, at the
addresses set forth in the first page hereof or such
other address as the parties, as applicable, may
designate pursuant to Section 10 hereof. Any such
service by delivery or mail shall be deemed to have the
same force and effect as personal service within the
State of New York.
11.7 Except for GameTek's delivery obligations
with respect to delivery of notice of final code approval
for the Game Titles pursuant to Schedule "A" annexed
hereto (which are subject to certain exclusive remedy
provisions) and as may otherwise be provided herein,
neither party shall be deemed to be in breach of any of
its obligations hereunder unless and until it shall have
been given specific written notice by certified or
registered mail, return receipt requested, of the nature
of such breach and it shall have failed to cure such
breach within thirty (30) days (ten days in the case of a
payment default) after receipt of such written notice.
11.8 If any provision of this Agreement is or
becomes or is deemed invalid, illegal or unenforceable
under the applicable laws or regulations of any
jurisdiction, such provision will be deemed amended to
conform to such laws or regulations if such amendment can
be effected without materially altering the intention of
the parties; otherwise it shall be stricken and the
remainder of this Agreement shall remain in full force
and effect.
11.9 Wherever the approval or consent of a
party is required hereunder, such approval or consent
shall be in writing and shall not be unreasonably
withheld or delayed.
11.10 If Take Two is not able to receive
payment from any customer in United States dollars
because such payment is prohibited or restricted by
applicable laws or governmental regulations, then
GameTek's Share may be paid by Take Two in the same
currency in which Take Two receives such payment,
applying Citibank N.A.'s exchange rate as in effect on
the date such payment is due to GameTek.
12. CONFIDENTIAL INFORMATION
12.1 Each party hereto shall keep in
confidence and not disclose to any third party, without
the written permission of the other party, the
proprietary information of such other party disclosed
under or pursuant to this Agreement. This requirement of
confidentiality shall not apply to information that is
(a) in the public domain through no wrongful act of the
receiving party; (b) rightfully received by the receiving
party from a third party who is not bound by a
restriction of nondisclosure; (c) already in the
receiving party's possession without restriction as to
disclosure; or (d) required to be disclosed by applicable
rules and regulations of government agencies or judicial
bodies. This obligation of confidentiality shall survive
termination of this Agreement.
13. EFFECT ON AGREEMENT OF BANKRUPTCY OF GAMETEK
13.1 This Agreement and all rights and
licenses granted by GameTek to Take Two pursuant to this
Agreement are and shall otherwise be deemed to be, for
the purpose of Section 365(n) of the United States
Bankruptcy Code (the "Bankruptcy Code") an executory
agreement under which GameTek is a licensor of
"intellectual property" as defined under Section 101(35A)
of the Bankruptcy Code. The provisions of Section 14
herein relating to the source code escrow and any
separate escrow agreements entered into thereunder shall
be considered "supplementary agreements" (as that term is
used in the Bankruptcy Code) to such license and grant of
intellectual property rights. GameTek agrees that if
GameTek as a debtor-in-possession or if a trustee in
bankruptcy rejects this Agreement, Take Two may elect to
retain its rights under this Agreement as provided under
Section 365(n) of the Bankruptcy Code. Upon written
request of Take Two to GameTek or the trustee in
bankruptcy, GameTek or such trustee shall allow Take Two
to exercise its rights under this Agreement and shall not
interfere with the rights of Take Two as provided in this
Agreement, provided that Take Two shall continue to pay
all payments as and when due to GameTek hereunder and
shall continue to otherwise perform all of its
obligations hereunder when due.
14. SOURCE CODE ESCROW
14.1 Deposit of Source Code Into Escrow.
GameTek represents, warrants and covenants that, within
10 days after the execution of this Agreement, it shall
deposit a copy of the source code for the Game Titles and
all related technical information necessary to complete
and manufacture the Game Titles (except for proprietary
third party software tools) with an escrow agent to be
mutually agreed upon in writing by GameTek and Take Two
(the "Escrow Agent"). GameTek shall provide updated
source code and technical information to the Escrow Agent
on a bi-weekly basis in accordance with and as required
by this Agreement or any amendment hereto. Take Two
shall be entitled, at its sole cost, to audit the
escrowed source code and technical information
periodically at the offices of the escrow agent to ensure
GameTek's compliance with the deposit requirements of
this Section 14, but without making any copies thereof or
removing any portion thereof from the escrow agent's
offices. In addition to the foregoing, in the event of
an occurrence of a condition for release of the source
code, Take Two shall be entitled to obtain from GameTek
the source code for any portions of the of the Game
Titles or technical information relating thereto,
including work-in-progress, that has been created but not
deposited with the Escrow Agent. Fees and expenses of
any Escrow Agent shall be paid by Take Two.
14.2 Conditions for Release of Source Code.
Such copies of the source code and technical information
shall be held in escrow and shall be released to Take Two
only upon the payment of any duplication costs and other
handling charges of the Escrow Agent, and only during the
term and prior to the termination of this Agreement, in
the event that:
(a) GameTek (i) files a petition for
relief or reorganization in bankruptcy; (ii) makes an
assignment for the benefit of creditors or is adjudicated
as bankrupt or insolvent (iii) a custodian, receiver
trustee or other officer with similar powers is appointed
for it or its property or (iv) an involuntary petition in
bankruptcy is filed against GameTek which is not stayed
or discharged within ninety (90) days after filing; or
(b) GameTek ceases to actively develop
the Game Titles either directly or indirectly through the
loss and non-replacement of key individuals responsible
for development of the Game Titles (such cessation of
development to be deemed conclusively to have occurred in
the event of a delay of ninety (90) days or more in the
delivery of any milestone required to be delivered by
GameTek hereunder); or
(c) GameTek materially fails or
discontinues to correct any Bugs or other defects or
comply with any requests by Nintendo for modifications
necessary to obtain required Nintendo approvals and such
failure or discontinuance continues for thirty (30) days
after notice of default from Take Two. GameTek shall
promptly provide Take Two with copies of any request by
Nintendo (including memoranda of any oral request), for
such modifications.
14.3 Development of Game Titles. In the event
of a release of the source code pursuant to this Section
14, GameTek shall use its reasonable best efforts to
assign its rights under any applicable agreement with
respect to the Game Titles in order to facilitate the
completion of development of such Game Titles. Take Two
may hire any software developer or programmer or outside
development companies, regardless of whether such persons
or entities were previously employed by GameTek, in order
to complete the development of the Game Titles but may
not solicit any employees or contractors then employed or
retained by GameTek; provided that to the extent that the
services of any such employees or contractors then
employed or retained by GameTek are required for the
completion of any Game Title, the parties shall enter
into a service sharing arrangement under which Take Two
may obtain the services of such employees and/or
contractors on a part-time or after-hours basis for the
purpose of completing the development of such Game Title
as long as such sharing does not materially interfere
with GameTek's operations. GameTek hereby consents to
the utilization by such persons or entitles of
intellectual property of GameTek necessary to complete
the development of the affected Game Titles and agrees to
cooperate with Take Two in obtaining the services of
persons or entities required to complete development of
the Game Titles.
IN WITNESS WHEREOF, the parties hereto have
signed this agreement as of the day and year first above
written.
TAKE TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Ryan A. Brant
---------------------------
Its: Chief Executive Officer
--------------------------
Date: July 29, 1997
-------------------------
GAMETEK, INC.
By: /s/ Robert L. Underwood
---------------------------
Its: Authorized Signer
--------------------------
Date: July 29, 1997
-------------------------
[Signature page to GameTek/Take Two N64 Distribution
Agreement.]
SCHEDULE A
Game Titles:
a. Wheel of Fortune for the Nintendo N64 game
system
b. Jeopardy! for the Nintendo N64 game system
Milestone Schedule:
a. Written notice of final code approval for
Wheel of Fortune - September 18, 1997.
b. Written notice of final code approval for
Jeopardy! - November 10, 1997
Third Party Royalties:
a. Wheel of Fortune: (i) (**)% of the
aggregate of (i) GameTek's Cost of Goods, (ii) the
GameTek Share, and (iii) all Third Party Royalties
(exclusive of any Third Party Royalties payable to
Califon Productions, Inc.) with respect to each unit,
payable to Califon Productions, Inc.; and
(ii) $(**) per unit,
payable to Vanna White.
b. Jeopardy!: (i) (**)% of the aggregate of
(i) GameTek's Cost of Goods, (ii) the GameTek Share, and
(iii) all Third Party Royalties (exclusive of any Third
Party Royalties payable to Califon Productions, Inc.) of
each unit, payable to Califon Productions, Inc.; and
(ii) $(**) per unit, payable
to Alex Trebek.
