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Exhibit 10.5
[ATARI LOGO]
Atari,Inc.
417 5th Avenue
New York, NY 10016
www.atari.com
DISTRIBUTION AGREEMENT
The following terms and conditions comprise
the agreement ("Agreement") between
Atari, Inc. ("Atari") with offices at 417
Fifth Avenue, New York, 10016 and
Humongous, Inc. ("Publisher") with offices
at 417 Fifth Avenue, New York, 10016,
by which Atari shall distribute computer
programs published or created by
Publisher. This Agreement shall be
effective as of the 22nd day of August, 2005.
1. Publisher:
Humongous, Inc.
2. Key Contacts:
(Atari)
Frederic Chesnais, Chief Executive Officer, with a
copy to General Counsel, Humongous, Inc.
(Publisher)
3. Executive Contacts:
Ezra
Chen (Atari)
Alyssa Padia (Publisher)
4. Grant of Rights: Atari
shall have the exclusive right to distribute all
Software
Packages owned or controlled by Publisher throughout the
Territory
in the Channels of Distribution (as defined below).
5. Definitions:
a.
"Atari Net
Cost" means Net Revenues, as defined below, less the
Marketing Development Fund.
b.
"Manufacturing Costs" means the costs of manufacturing and
packaging
for the Software Packages, including license fees, royalties
and
other consideration payable to platform manufacturers (e.g.,
Sony,
Nintendo, and Microsoft), shipping and handling, insurance, and
customs and brokerage fees.
c.
"Marketing
Development Fund" or "MDF" means the net dollar amount
credited to Atari for costs associated with the marketing,
merchandising, distribution, and inventory maintenance and
management of each Title. The MDF for each title shall be equal
to
fifteen percent (15%) of Net Revenues.
d.
"Returns"
means defective, overstock and other returns and
markdowns, price protection and the like given in lieu of
returns
and/or price reductions given to customers.
e.
"Software
Packages" means Titles on CD-ROM or DVD-ROM, along with
any applicable manuals.
f.
"Net
Revenues" means the actual amounts received by Atari for sale
or sublicensing of the Software Packages set forth on Exhibit A
hereto, i.e. gross revenue less only Returns (in accordance with
the
provisions of Section 8(b) below).
g.
"Titles"
means the computer programs later named in Exhibit A or in
addenda substantially similar to Exhibit A. The platform(s) for
each
Title shall also be set forth on the applicable addendum.
6. Term: The term of this
Agreement shall commence on the date first written
above and
shall continue until March 31, 2006, provided that Publisher
shall have
the option, via notice to Atari no later than February 15,
2006, to
extend the term for an additional one-year period, through
March
31, 2007,
on the same terms and conditions (the "TERM"). The Term may be
extended
for one or more additional one (1) year periods via a mutually
executed
amendment to this Agreement. The three (3) month sell-off
period
shall
commence as of the earlier expiration of this Agreement or upon
notice of
termination. Upon
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expiration
or earlier termination of this Agreement, Atari may return
unsold
Software Packages to Publisher for full credit.
7. Compensation and Price
Protection:
a.
For each
Software Package in a Jewel Case, in lieu of making any
other payment to Publisher, Atari shall pay Publisher the ATARI
NET
COST OF $3.00.
b.
In the
event that Publisher reduces the Standard Wholesale Price of
a Title or it offers Titles to other customers outside of the
Territory at a price lower than the Standard Wholesale Price,
Publisher shall immediately offer that reduced price to Atari.
In
addition, Publisher shall promptly credit Atari's account for
the
difference between the Standard Wholesale Price charged to Atari
and
the reduced price for each Software Package either held in
inventory
by Atari or shipped by Atari to the Channels of Distribution and
not
yet sold-through on the date the reduced price is first offered
("Price Protection").
8. Payment of
Compensation:
a.
Atari
shall pay Publisher the Atari Net Cost for all Software
Packages set forth in the applicable addendum.
b.
Atari
shall pay Publisher the Atari Net Cost thirty (30) days after
the end of each calendar month for all Software Packages shipped
to
customers during that month. Such Atari Net Cost shall be
calculated
on the basis of the gross revenue generated during the
applicable
month, less a provisional reserve (not to exceed twenty percent
(20%) of the gross amounts invoiced with respect to such month
by
Atari for sale or sublicensing of the Software Packages) for
Returns, such reserve to be liquidated upon receipt of final
data
with respect to the applicable Software Packages from customers,
and
in any event not later than thirty (30) days after the expiration
or
earlier termination of the Term.
c.
If, for
any reason, a credit balance or portion of a credit balance
exists for a period of thirty (30) days in favor of Atari, or
on
expiration or earlier termination of this Agreement, Publisher
shall
immediately reimburse Atari the credit balance or remaining
portion
of the credit balance.
9. Promotional copies: A
minimum of fifty (50) units of each Software
Package,
not for resale, without compensation.
10. Shelf Price: Retailers shall
have the discretion to set the shelf price.
11. Reports and Orders:
a.
Atari
shall provide a report to Publisher twice a month detailing
Atari's sell-in numbers, warehouse inventory and sell-through
data
and field inventory to the extent available.
b.
Atari
shall manage inventory of the Software Packages on Publisher's
behalf, including placement of orders for PC, Sony PS2 and
Nintendo
GBA Software Packages with the applicable manufacturer upon
instructions from Publisher. Publisher shall be responsible for
paying (or, in the case of Sony PS2 Software Packages, for
reimbursing Atari for) all manufacturing costs incurred with
respect
to such Software Packages.
c.
Upon
expiration or earlier termination of this Agreement, all title
to any unsold Software Packages shall pass to Publisher.
12. Channels of Distribution:
shall mean all traditional wholesale and retail
channels
including without limitation, online sales, but expressly
excluding
stadium sales and sports-related specialized retail (the
"CHANNELS
OF DISTRIBUTION").
13. Title and Risk of Loss. All Software
Packages shall be shipped from the
applicable manufacturer at Publisher's
cost, FOB Atari's warehouse. Risk of loss
and title for Software Packages shall pass
to Atari
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from Publisher upon delivery to Atari's
designated warehouse. For Software
Packages returned to Atari by Atari's
customers, for which title has passed to
those customers, title will pass from the
Atari's customer to Atari upon return
to Atari. Title to all Software Packages
sold by Atari to Publisher in the
context of the sale of assets of August
2005 is hereby re-transferred by
Publisher to Atari, to remain with Atari
until sold to customers or returned to
Publisher. Risk of loss will remain with
Atari until re-delivery to Publisher of
returned Software Packages.
14. Territory: Canada, the United States
(including its territories, possessions
and foreign military bases) and Mexico.
15. Returns and replacements:
a.
Subject to
Section 8(b), any Software Package that is damaged or
contains a manufacturing defect may be returned by Atari to
Publisher.
b.
Subject to
Section 8(b), Atari shall have the right to return all
or a portion of the Software Packages of any Title at any time for
a
full refund of the Atari Net Cost paid for those Software
packages.
c.
If
Publisher introduces a new version (other than a sequel) of a
previously released Title, at its option, Atari may exchange
Software Packages of that Title with Publisher.
d.
Atari
shall bear the freight expenses from Atari's warehouse for the
return of the Software Packages.
e.
For any
Software Packages returned, Atari shall request
