EXCLUSIVE DISTRIBUTION AGREEMENT

 

 

 

                                                                    Exhibit 10.1

 

                                                     [TWO WAY TV AUSTRALIA LOGO]

 

 

 

 

                        EXCLUSIVE DISTRIBUTION AGREEMENT

 

 

 

 

 

                           TWO WAY TV AUSTRALIA LIMITED

 

                                 ZONE4PLAY, INC

 

 

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                        EXCLUSIVE DISTRIBUTION AGREEMENT

 

DATE AUGUST 17, 2005

 

PARTIES

 

     TWO WAY TV AUSTRALIA LIMITED (ABN 28 007 424 777) of Level 3, 55 Pyrmont

     Bridge Road, Pyrmont NSW 2009 Australia ("TWTVA")

 

     ZONE4PLAY, INC., a company incorporated under the laws of the state of

     Delaware, U.S.A., having its registered offices at 103 Foulk Road, Suite

     202, Wilmington, Delaware ("ZONE4PLAY")

 

     (each a "PARTY" and together the "PARTIES").

 

BACKGROUND

 

A.    WHEREAS, Zone4Play is a developer of interactive game technology that

     provides an end-to-end solution allowing service providers to deliver games

     to subscribers over multiple network platforms such as interactive TV,

     wireless networks and the Internet and is the owner of the entire right,

     title and interest in and to, or otherwise has rights in, the Intellectual

     Property;

 

B.    WHEREAS, TWTVA is a leading provider of live, competitive, enhanced TV

     entertainment and interactive TV applications and technology in Australia;

     and

 

C.    WHEREAS, Zone4Play desires to have TWTVA distribute, market and promote,

     and TWTVA desires to distribute, market and promote on behalf of Zone4Play,

     the Zone4Play Intellectual Property and the Products to gaming and wagering

     operators, broadcasters and mobile operators (collectively, "Operators") to

     enable mass participation gaming and gambling through television and mobile

     phones in the Territory.

 

D.    NOW, THEREFORE, in consideration of the premises of the covenants and

     agreements herein contained, and intending to be legally bound hereby, the

     Parties hereto agree as follows:

 

OPERATIVE PROVISIONS

 

1.    INTERPRETATION

 

1.1   DEFINITIONS

 

     The following definitions apply in this Agreement.

 

     "AFFILIATES" means any entity that controls, is controlled by or is under

     common control with Zone4Play or TWTVA, as applicable.

 

     "ASIA" means Bangladesh, Bhutan, Brunei, Cambodia, China, East Timor, Hong

     Kong, India, Indonesia, Japan, Laos, Macau, Malaysia, Maldives, Mongolia,

     Myanmar, Nepal, North Korea, Pakistan, Papua New Guinea, Philippines,

     Singapore, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam.

 

     "AUSTRALASIA" means Australia and New Zealand.

 

     "BUSINESS DAY" means a day on which banks are open for business in Sydney,

     Australia.

 

     "COMMENCEMENT DATE" means 1 June 2005.

 

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     "CONFIDENTIAL INFORMATION" means any and all technical, business, client or

     proprietary information whether oral, visual, machine recognisable or

     written relating to the business affairs, business strategies and

     practices, methodologies, pricing, product information, client lists,

     operations, processes, plans or intentions, market opportunities, services,

     research, inventions, patents, technology, trade secrets, Know-How,

     software, source code, and potential or actual customer information of the

     Discloser, and in the case of Zone4Play, the Intellectual Property, which

     information will be deemed to be confidential, but does not include the

     Excluded Information. The terms of this Agreement shall be deemed

     Confidential Information.

 

     "DISCLOSER" means the Party providing Confidential Information to the

     Recipient or its Affiliates.

 

     "EXCLUDED INFORMATION" means:

 

     (a)   information which the Recipient can document and prove is or becomes

          publicly available through no improper action or inaction by the

          Recipient, or

 

     (b)   information which was known by the Recipient or was legitimately in

          the Recipient's possession prior to receipt of the Discloser's

          Confidential Information as shown by the Recipient's business records

          kept in the ordinary course, or

 

     (c)   information which is disclosed with the prior written approval of the

          Discloser, or

 

     (d)   information received from a third party, where such third party is not

          prohibited from disclosing such information to the Recipient by a

          contractual or fiduciary obligation, or

 

     (e)   information which is independently developed by the Recipient without

          use of or reference to the Discloser's Confidential Information and

          provided that the Recipient can demonstrate such independent

          development by documented evidence prepared contemporaneously with

          such independent development, or

 

     (f)   information which becomes known to the Recipient from a source other

          than the Discloser without breach of this Agreement by the Recipient

          and otherwise not in violation of the Discloser's rights.

 

     "FIRST AND LAST MATCHING RIGHTS" means the provisions of clause 4.

 

     "INDEPENDENT ASSESSOR" means a partner of a reputable law firm practising

     in England which has not previously done any legal work for either TWTVA or

     Zone4Play.

 

     "INITIAL TERM" means the period of five (5) years commencing on the

     Commencement Date.

 

     "INTELLECTUAL PROPERTY" means:

 

     (a)   any copyright, patent, design, trade mark, eligible layout right or

          other similar right, whether registered or not;

 

     (b)   any invention, discovery, trade secret, technical information or

          Know-How, whether patentable or not;

 

     (c)   any computer software (including source code and object code),

          hardware or firmware;

 

     (d)   any Confidential Information;

 

     (e)   any other rights resulting from intellectual activity in any field;

 

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     (f)   any database rights, and

 

     (g)   any grant or certificate of title for any thing referred to in

          paragraph (a) to (f) inclusive,

 

     which may subsist anywhere in the world, for the full term of such rights

     and any extensions or renewals thereof, subsisting prior to, at or after

     the Commencement Date (whether or not any of these rights are registered,

     and including applications and the right to apply for registration of any

     of such rights). In the case of Zone4Play, Intellectual Property shall

     include any thing referred to in paragraph (a) to (f) inclusive that:

 

          i.    has been developed or otherwise owned by Zone4Play or any

               Affiliate; or

 

          ii.   is owned by a third party, but which Zone4Play is entitled to

               make available to TWTVA under license in the Territory; or

 

          iii. comprises games, applications and underlying technology for iTV,

               SMS-TV and mobile, for both Play for Fun Products and Play for

               Real Products.

 

     "KNOW HOW" means all identifiable knowledge, experience, data and technical

     or commercial information, whether in human or machine readable form and

     whether stored physically, electronically or otherwise, which might

     reasonably be of commercial interest to either Party in relation to the

     Licence or a Proposed Arrangement.

 

     "LICENCE" means the provisions of clause 2.

 

     "OPTION TERM" means the period of three (3) years commencing on the expiry

     of the Initial Term.

 

     "OPTIONS" means each of the three options to renew available under clause

     8.2(a), (b) and (c).

 

      "PLAY FOR FUN PRODUCTS" means the applications listed in Appendix A and any

     other Intellectual Property which is not included within Play for Real

     Products.

 

     "PLAY FOR REAL PRODUCTS" means the applications listed in Appendix B and

     any other Intellectual Property which allows end users to participate in an

     interactive activity while paying or risking real money (except where the

     only money paid is a subscription fee or entry fee for the game, or the

     channel which includes the game).

 

     "PRODUCTS" means Play for Fun Products and Play for Real Products.

 

     "PROPOSED ARRANGEMENT" means any plan, proposal, agreement, arrangement or

     understanding for the use or commercial exploitation of Zone4Play's

     Intellectual Property in Asia, including by way of licence, sale or joint

     venture.

 

     "RECIPIENT" means the Party receiving Confidential Information from the

     Discloser or its Affiliates.

 

     "REVENUE" means all sums of money (excluding all taxes or government

     duties, including purchase, service, sales, excise or value added taxes)

     actually received by TWTVA from exploitation of Zone4Play's Intellectual

     Property pursuant to the Licence. For the avoidance of doubt, "Revenue" is

     net of all costs and expenses, including prizes, paid by TWTVA to third

     parties in the course of exploiting the Intellectual Property (but not

     including TWTVA's own internal costs and expenses).

 

     "TERM" means the Initial Term and (if TWTVA exercises one or more of the

     Options) the Option Term.

 

     "TERRITORY" means Australasia and Asia.

 

 

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1.2   RULES FOR INTERPRETING THIS AGREEMENT

 

     Headings are for convenience only, and do not affect interpretation. The

     following rules also apply in interpreting this Agreement, except where the

     context makes it clear that a rule is not intended to apply.

 

     (a)   A reference to:

 

          (i)   a document or agreement, or a provision of a document or

               agreement, is to that document, agreement or provision as

               amended, supplemented, replaced or novated;

 

          (ii) a person includes any type of entity or body of persons, whether

               or not it is incorporated or has a separate legal identity, and

               any executor, administrator or successor in law of the person;

               and

 

          (iii) any thing (including a right, obligation or concept) includes

               each part of it (but nothing in this agreement implies that

               performance of part of an obligation constitutes performance of

               the obligation).

 

     (b)   A singular word includes the plural, and vice versa.

 

     (c)   If a word is defined, another part of speech has a corresponding

          meaning.

 

     (d)   The word "agreement" includes an undertaking or other binding

          arrangement or understanding, whether or not in writing.

 

     (e)   The word "including", or similar parts of speech, does not limit the

          kinds of things that may be included.

 

     (f)   No part of this Agreement may be construed adversely to a Party on the

          basis that that Party was responsible for preparing that part of this

          Agreement.

 

2.    LICENCE FOR AUSTRALASIA

 

     GRANT OF LICENCE FOR PLAY FOR FUN PRODUCTS IN AUSTRALASIA

 

2.1   Subject to TWTVA's timely payment of all license fees and other sums due

     hereunder, Zone4Play hereby grants to TWTVA the exclusive, non-transferable

     (except as set forth in clause 12.2), non-sublicensable (except as set

     forth in clause 2.2(e)) right and licence to distribute, market and promote

     Zone4Play's Intellectual Property only in connection with the Play for Fun

     Products to Operators in Australasia during the Term (the "PLAY FOR FUN

     PRODUCT LICENCE").

 

2.2   The Play For Fun Product Licence:

 

     (a)   is exclusive, so that Zone4Play may not itself, nor permit any other

          third party to, exploit or use its Intellectual Property in connection

          with the Play for Fun Products in Australasia, unless expressly

          permitted in writing to do so by TWTVA;

 

     (b)   is transferable only in accordance with clause 12.2 of this Agreement;

 

     (c)   allows TWTVA to use, combine, develop, modify and make available to

          Operators the Intellectual Property in connection with the Play for

          Fun Products within Australasia;

 

 

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     (d)   allows TWTVA to exercise its rights in relation to Zone4Play's

          Intellectual Property and the Play for Fun Products on any

          distribution method or platform, whether digital or analog, including

          any form of television, mobile telephony or computer-based

           transmission compatible with the Play for Fun Products (whether now

          known or developed at any time during the Term); and

 

     (e)   allows TWTVA to further sublicense the Intellectual Property in

          connection with Play for Fun Products on a case by case basis as

          expressly permitted by Zone4Play in writing (such permission not to be

          unreasonably withheld).

 

     GRANT OF LICENSE FOR PLAY FOR REAL PRODUCTS IN AUSTRALASIA

 

2.3   Subject to TWTVA's timely payment of all license fees and other sums due

     hereunder, Zone4Play hereby grants to TWTVA the exclusive, non-transferable

     (except as set forth in clause 12.2), non-sublicensable (except as set

     forth in clause 2.4(e) right and licence to distribute, market and promote

     Zone4Play's Intellectual Property only in connection with the Play For Real

     Products to Operators in Australasia during the Term (the "Play For Real

     Product Licence").

 

2.4   The Play For Real Product Licence:

 

     (a)   is exclusive, so that Zone4Play may not itself, nor permit any other

          third party to, exploit or use Zone4Play's Intellectual Property in

          connection with the Play for Real Products in Australasia, unless

          expressly permitted in writing to do so by TWTVA;

 

     (b)   is transferable only in accordance with clause 12.2 of this Agreement;

 

     (c)   allows TWTVA to use, combine, and make available to Operators the

          Intellectual Property in connection with the Play for Real Products

          within Australasia;

 

     (d)   allows TWTVA to exercise its rights in relation to Zone4Play's

          Intellectual Property and the Play for Real Products on any

          distribution method or platform, whether digital or analog, including

          any form of television, mobile telephony or computer-based

          transmission compatible with the Play for Real Products (whether now

          known or developed at any time during the Term); and

 

     (e)   allows TWTVA to further sublicense the Intellectual Property in

          connection with Play for Real Products upon as case by case basis as

          permitted by Zone4Play in writing (such permission not to be

          unreasonably withheld).

 

     GENERAL PROVISIONS OF THE LICENCE

 

2.5   Zone4Play acknowledges that it has no rights of any kind in relation to

     work performed or property developed or used by TWTVA which does not

     directly or indirectly make use of the Products, Zone4Play's Intellectual

     Property or Zone4Play's Confidential Information. Except for the limited

     license rights expressly granted to TWTVA under this clause 2, Zone4Play

     retains all right, title and interest in and to the Products, Zone4Play's

     Intellectual Property and Zone4Play's Confidential Information.

 

2.6   Modifications and improvements made to Zone4Play's Intellectual Property by

     TWTVA or any of its permitted sublicensees shall be owned jointly by

     Zone4Play and TWTVA.

 

2.7   As Zone4Play develops further Products during the Term, such Products will

     be provided to TWTVA under the appropriate license grant of this clause 2,

     for no additional up-front payment (subject to clause 2.9) and on the terms

     and conditions of this Agreement (including clauses 5.1 to 5.8).

 

 

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2.8   TWTVA and its Affiliates shall not without Zone4Play's prior written

     consent or as otherwise expressly set forth in this Agreement: (i) sell,

     rent, lease, sublicense or otherwise transfer, distribute or otherwise make

     available Zone4Play's Intellectual Property, the Products or Zone4Play's

     Confidential Information to any third party; (ii) modify, translate,

     reverse engineer, decompile or disassemble Zone4Play's Intellectual

     Property, the Products or Zone4Play's Confidential Information (except to

     the extent permitted under clause 2.2.); (iii) create derivative works

     based upon Zone4Play's Intellectual Property, the Products or Zone4Play's

     Confidential Information (except to the extent permitted under clause 2.2;

     or (iv) alter, destroy or otherwise remove any proprietary notices or

     labels on or embedded within Zone4Play's Intellectual Property, the

     Products or Zone4Play's Confidential Information.

 

     THIRD PARTY RIGHTS

 

2.9   Where a third party has licensed rights to Zone4Play in relation to Play

     For Fun Products licensed hereunder, TWTVA shall pay all upfront costs (if

     any) of obtaining those third party rights in Australasia where those costs

     are agreed in advance by TWTVA. Zone4Play shall bear the costs of any

     revenue-share based payments to such third parties, and such costs will not

     be added to the Variable Licence Fee payable by TWTVA under clause 5.1.

 

2.10 If Zone4Play is conducting discussions with third parties for deployment of

     any element of Zone4Play's Intellectual Property in Australasia, Zone4Play

     must advise such third parties at the commencement of such discussions of

     the nature of TWTVA's rights pursuant to the Licence.

 

2.11 At the time Zone4Play commences negotiations for third party rights in

     Zone4Play's sole discretion, and at the time Zone4Play concludes those

     negotiations, Zone4Play will:

 

     (a)   inform TWTVA, and keep TWTVA informed at all times, of the nature of

          the third party rights so long as such disclosure of information to

          TWTVA shall not cause Zone4Play to breach any of its confidentiality

          obligations with such third party, and

 

      (b)   use its commercially reasonable, best efforts to obtain the benefit of

          those rights for use by TWTVA on the best commercial terms available.

 

2.12 Before concluding negotiations with third parties on rights fees for

     Australasia, Zone4Play must inform TWTVA of the proposed deal and may offer

     TWTVA the opportunity to negotiate directly with the third party in

     Zone4Play's sole discretion. All such agreements between TWTVA and third

     parties will be subject to Zone4Play's approval, such approval not to be

     unreasonably withheld.

 

2.13 Should Zone4Play develop applications of its Intellectual Property in

     conjunction with third parties, Zone4Play must use all commercially

     reasonable efforts to ensure that the rights to such applications are not

     granted to such third parties for exploitation in connection with the Play

     For Fun Products in the Territory.

 

 

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3.    INSTALLATION, OPERATION, SUPPORT AND ASSISTANCE

 

     PLAY FOR FUN PRODUCTS

 

3.1   Sixty (60) days following execution of this Agreement, Zone4Play will

     supply TWTVA with functional specifications, graphical material and any

     other documentation for the Play For Fun Products, whether they use Open TV

     or Power TV or any other code.

 

3.2   TWTVA will provide Zone4Play with the specifications for set-top boxes used

     in Australasia. Zone4Play must use every commercially reasonable effort to

     provide TWTVA with versions of its Products (including games and underlying

     technology) which are compliant with, and will operate on, those set-top

     boxes within a reasonable period (to be agreed between the Parties) after

     TWTVA provides the set-top box specifications.

 

3.3   Once TWTVA signs a deal with an Operator in Australasia, Zone4Play will

     supply TWTVA with all tools and background technology necessary to deploy

     Products with that Operator, including all necessary hardware and software.

 

3.4   TWTVA will be in charge of integrating the Play for Fun Products into the

     Australasian broadcast and mobile platforms and making any adjustments, if

     needed. However, in relation to such integration and adjustment, Zone4Play

     will provide consulting services and advice to TWTVA at no additional cost

     (if reasonably required by TWTVA).

 

3.5   If TWTVA wishes Zone4Play to assist in porting the Power TV applications to

     the Open TV platform, Zone4Play will provide all assistance reasonably

     requested by TWTVA, including the sending of two people to Australia for

     two weeks (including all airfares, accommodation and technical effort),

     plus any reasonable further ongoing assistance that TWTVA needs in porting

     applications. TWTVA will pay Zone4Play an additional once only amount of

     US$50,000 for this process if TWTVA so requests.

 

3.6   If TWTVA wishes to supply Zone4Play's multiplayer iTV games to Operators in

     Australasia, Zone4Play will install the required designated server (which

     will service all customers) at TWTVA's premises. TWTVA will pay Zone4Play

     US$35,000 for expenses to install that initial service (including travel

     and accommodation expenses, one (1) designated server with accompanying

     software, and integration). If an Operator requires additional servers

     and/or other hardware, then the Operator will pay for that additional

     hardware, or (at the request of TWTVA) Zone4Play will supply the additional

     hardware at the lowest cost possible at that time and TWTVA will reimburse

     Zone4Play for all such hardware. Zone4Play will provide TWTVA with a full

     specification for the multiplayer games engine.

 

3.7   If TWTVA wishes to launch Zone4Play's SMS-TV solutions, based on the MixTV

     server system, in Australasia, then Zone4Play will install the required

     designated server (which will service all customers) at TWTVA's premises.

     TWTVA will pay Zone4Play US$35,000 for expenses to install that initial

     service (including travel and accommodation expenses, one (1) designated

     server with accompanying software, and integration). If an Operator

     requires additional servers and/or other hardware, then the Operator will

     pay for that additional hardware, or (at the request of TWTVA) Zone4Play

     will supply the additional hardware at the lowest cost possible at that

     time and TWTVA will reimburse Zone4Play for all such hardware.

 

 

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     PLAY FOR REAL PRODUCTS IN AUSTRALASIA

 

3.8   Once an agreement with an Operator for a Play For Real Product is in place,

     Zone4Play will supply, install and integrate a completed solution at no

     additional cost (subject to clause 3.9), including:

 

     (a)   iTV and/or SMS-TV and/or mobile development and deployment of

          applications;

 

     (b)   Enabling technologies:

 

          (i)   MixTV servers to support SMS-TV applications;

 

          (ii) ZoneITS server to support iTV applications;

 

          (iii) ZoneITS server to support mobile applications; and

 

     (c)   third party back office integration with the Operator and any

          additional Operator involved in the delivery of the Product to end

          users (eg. where the agreement is signed with a gambling Operator, a

          broadcaster or mobile Operator may also be involved).

 

3.9   For each gambling Operator in Australasia who licenses a Play for Real

     Product, Zone4Play will receive a one time fee of US$35,000 for expenses to

     install the Product (regardless of the number of Products taken by that

     Operator). This fee will cover one (1) designated server with accompanying

     software, travel and accommodation expenses, and all integration work that

     is required. If an Operator requires additional servers and/or other

     hardware, then the Operator will pay for that additional hardware, or (at

     the request of TWTVA) Zone4Play will supply the additional hardware at the

     lowest cost possible at that time and TWTVA will reimburse Zone4Play for

     all such hardware.

 

3.10 TWTVA will be in charge of managing all aspects of the Play for Real

     Products (including but not limited to customer service) once the Product

     is installed and integrated.

 

     SOURCE CODE AND ESCROW

 

3.11 Zone4Play will provide source code for the Products to TWTVA, where that

     source code can reasonably be considered fundamental to the efficient

     day-to-day operation of the Products licensed to TWTVA. Zone4Play will

     supply source code in sufficient time to enable the timely deployment of

     Products in accordance with deals that TWTVA enters into pursuant to the

     Licence.

 

3.12 Zone4Play shall place into escrow the source code for the Products (in

     addition to the source code supplied under clause 3.12) together with all

     source code and technologies used in any deployments by Zone4Play under

     this Agreement (including back-end technologies) ("Escrow Materials").

     Zone4Play shall establish the escrow account with TWTVA's consent, and

     TWTVA shall pay all associated escrow fees. TWTVA shall not use the Escrow

     Materials unless and until a Release Condition occurs and the Escrow

     Materials are released to TWTVA by the escrow agent. As used in this

     Agreement, "Release Condition" shall mean any of the following events that

     have occurred and that have not been cured by Zone4Play within thirty (30)

     business days following written notice from TWTVA and TWTVA is not

     otherwise in default of this Agreement: (i) the voluntary or involuntary

     filing of a petition in bankruptcy by Zone4Play or the initiation of any

     proceeding under any bankruptcy or insolvency laws for the purpose of

     Zone4Play's bankruptcy, reorganization (other than reorganisation while

     solvent) or liquidation, (ii) Zone4Play becomes insolvent, or (iii)

     Zone4Play ceases to do business in the ordinary course of business without

     a successor or assignee.

 

 

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3.13 The Parties will sign an escrow agreement with an agreed escrow provider

     located in the United Kingdom. Subject to clause 3.11 above, the escrow

     agreement will include standard terms and conditions allowing TWTVA to

     access and use the source code and technologies in the event of a Release

     Conditionand strictly in accordance with the purpose of this Agreement.

 

     GENERAL ASSISTANCE

 

3.14 Zone4Play will supply TWTVA with all technical assistance reasonably

     requested by TWTVA in order to use or commercially exploit Zone4Play's

     Intellectual Property in the Territory, pursuan