EX-10.5 8 file006.htm SOFTWARE DISTRIBUTION AGMT., DATED 4/8/02

KONAMI CORPORATION
SOFTWARE DISTRIBUTION AGREEMENT

This SOFTWARE DISTRIBUTION AGREEMENT (the "Agreement") is made and
entered into by and between KONAMI OF AMERICA, INC., a company organized under
the laws of Illinois ("Konami"), and MAJESCO SALES, INC., a company organized
under the laws of New Jersey ("Distributor"), as of April 8, 2002 (The
"Effective Date"), and consists of this signature page and the Exhibits hereto,
which are incorporated in full by this reference. Capitalized terms used in this
Agreement shall be as defined on this signature page and in Exhibit B ("General
Terms").

EXHIBITS

Exhibit A: Special Terms
Exhibit B: General Terms
Exhibit C: Certificate to Nintendo

RECITALS

Konami develops, markets and licenses general commercial computer game
software far use on, among others, the Nintendo Advanced Game Boy ("AGS")
operating systems.

Distributor wants to distribute through customary retail channels
certain of Konami's software in object code form to consumers located within the
Territory.

Konami is willing to grant Distributor the limited and exclusive right
to distribute through customary retail channels the object code form of certain
of Konami's software products, subject to the terms and conditions of this
Agreement.

IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have executed and delivered this Agreement.

KONAMI OF AMERICA, INC. MAJESCO SALES, INC.

By: By:
-------------------------- --------------------------
Print Name: Print Name:
Print Title: Print Title:

Address: Address:
Telephone: Telephone:
Fax: Fax:

EXHIBIT A

SPECIAL TERMS

1. TERRITORY.

(A) DESCRIPTION OF TERRITORY: CANADA, MEXICO AND THE UNITED STATES.

(B) RESTRICTIONS.

(1) Distributor shall have the right to market and
distribute the Konami Products only to End Users
located in the Territory by means of Customary Retail
Channels.

(2) Konami shall have the right to prevent Distributor,
immediately upon written notice to Distributor, from
distributing the Konami Products in any country in
the Territory if Konami reasonably concludes, or is
informed by one of Konami's suppliers that such
supplier has determined, that the country (a) does
not provide adequate protection for Konami's or the
supplier's proprietary rights in the Konami Products
or (b) has laws, or the government has committed
acts, which Konami or the supplier deems injurious to
its business interests.

Without the prior written consent of Konami, Distributor shall
not, with respect to the Konami Products, (i) establish or
maintain outside of the Territory any branch, warehouse or
distribution depot and (ii) actively license, market or
otherwise promote the use or distribution of the Konami
Products outside of the Territory.

2. KONAMI SOFTWARE (Title, Operating System(s)).

ESPN Golf (AGB)*
ESPN Fishing (AGB)*
ESPN Skateboarding (AGB)*
Jurassic Park-Park Builder (AGB)*
Jurassic Park-island Attack (AGB)*
Jurassic Park-DNA (AGB)*
Castlevania-Circle of the Moon (AGB)

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* Expressly provided, however, that (i) the software marked with a "*" above
includes animated characters, music, trademarks and other intellectual
property not owned by Konam4 (ii) Distributor acknowledges the ownership of
such third-party intellectual property by third parties and that Distributor
must receive from such third parties the right to distribute such
intellectual property in conjunction with the distribution of the Konami
Software, (iii) Konami has no rights to, and accordingly excludes from the
definition of Konami Software and grants no rights to, such Intellectual
property, but (iv) Konami will make reasonable efforts to assist Distributor
in securing the rights necessarily for it to distribute the Konami Software
with third-party intellectual property, though Konami does not guarantee that
its assistance will result In Distributor receiving the rights so distribute
the Konami Software with the third-party intellectual property.

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Frogger Great Adventure; Temple of the Frog (AGB)
Gradius (AGB)
Konami Crazy Racers (AGB)

3. KONAMI TRADEMARKS.

Konami (logo arid name mark)
Castlevania-Circle of the Moon
Frogger's Great Adventure: Temple of the Frog
Gradius
Konami Krazy Racers

4. MINIMUM ROYALTIES, ADDITIONAL ROYALTIES AND PAYMENT TERMS.

(A) MINIMUM ROYALTIES.

AMOUNT: 1. Distributor shall pay to Konami non-refundable
royalties of (****) (calculated as based on the
distribution by Distributor of (****) copies of the
Konami Software known as Gradius and Konami Krazy
Racers (combined distribution) at a royalty rate of
(****) per copy, and (****) copies of the Konami
Software known as Frogger and Castlevania (combined
distribution) at a royalty rate of (****) per copy,
but in no way or manner actually dependent on the
number of copies actually distributed by Distributor).

2. Distributor shall pay to Konami non-refundable
royalties of (****) (calculated as based on the
distribution by Distributor of (****) copies of the
Konami Software known as ESPN Skateboarding. Jurassic
Park-Park Builder, Jurassic Park-Island Attack,
Jurassic Park-DNA, that includes third party
intellectual property, combined distribution with the
Konami Software in Section 4(a) 1) at a royalty rate
of (****) per copy, but in no way or manner actually
dependent on the number of copies actually
distributed by Distributor).

TERMS: The minimum payment set forth this Section 4(a) shall
be due and payable in accordance with the following
schedu1e:

DATE DUE AND PAYABLE AMOUNT
-------------------- ------

Effective Date (****) for Konami Software with
Konami exclusive intellectual
property.

60 days after first shipment (****) for Konami Software with
Konami exclusive intellectual
property.

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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(****) for Konami Software with
third party intellectual property.
(B) ADDITIONAL ROYALTIES/PURCHASE OF GOODS.

AMOUNT: 1. Distributor shall pay Konami a
non-refundable royalty of (****) for each copy
of the Konami Software which it distributes in
excess of (****) copies (combined distribution)
of Konami Software titles with Konami exclusive
intellectual property (Ciradius and Konami
K.razy Racers) and shall accrue solely based on
copies of the Konami Software distributed by
Distributor. Distributor shall pay Konami a
non-refundable royalty of (****) for each copy
of the Konami Software it distributes in excess
of (****) (combined distribution) for the
Konami Software titles with Konami exclusive
intellectual property (Frogger or Castlevania)
and shall accrue solely based on copies of the
Konami Software distributed by Distributor.
Royalties shall not be reduced due to the
return (for any reason) of any copies of the
Konami Software to Distributor or by any bad
debt.

2. Distributor shall pay Konami a
non-refundable royalty of (****) for each copy
of the Konami Software which it distributes in
excess of (****) copies (combined distribution)
of Konami Software with third party
intellectual property (ESPN Skateboarding,
Jurassic Park-Park Builder, Jurassic Park-bland
Attack, and Jurassic Park-DNA) and shall accrue
solely based on copies of the Konami Software
distributed by Distributor, and shall not be
reduced due to the return (for any reason) of
any copies of the Konami Software to
Distributor or by any bad debt.

3. If Distributor distributes the Konami
Software titles ESPN Golf or ESFN Fishing it
shall pay a non-refundable royalty of per unit
to Konami and shall accrue solely based on
copies of the Konami Software distributed by
Distributor, and shall not be reduced due to
the return (for any reason) of any copies of
the Konami software to Distributor or by any
bad debt.

4. If Distributor purchases enough of an
individual Konami Software title for Konami to
qualify for a volume discount on that title
from Nintendo then said discount can only be
used by Distributor as a credit against future
purchases of Konami Software pursuant to this
Agreement.

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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5. Distributor will not have any responsibility
or liability to third parties for royalties
associated with Konami Software containing
third party intellectual property.

TERMS: The royalties set forth in this Section 4(b)
shall accrue upon the shipment of each such
copy by Distributor to its customer.
Distributor shall pay such accrued royalties
within (****) after the end of each calendar
quarter in which such royalties accrue.

PURCHASE OF GOODS: Distributor shall submit an order for
Konami Software to Konami along with payment
for the cost of goods from Nintendo for the
Konami Software. Konami shall purchase the
Konami Software from Nintendo of America and
immediately transfer title to the Konami
Software to Distributor. Distributor shall
arrange for shipping of the Konami Software
from the Nintendo of America replication
facility. Konami shall issue an invoice to
Distributor for the Konami showing payment for
the Konami Software.

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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EXHIBIT B

GENERAL TERMS

1. DEFINITIONS.

1.1. CONFIDENTIAL INFORMATION means any and all information related to
a party that such party treats as confidential and any information relating to
third parties that such. party has an obligation to treat as confidential, which
is disclosed by such party to the other party in the course of performing the
duties and obligations of this Agreement, whether such information is in oral,
written, graphic or electronic form; provided that (a) if such information is in
writing or other tangible forms it is clearly marked as "proprietary or
"confidential" when disclosed to the receiving party; or (b) if such information
is not in tangible form, it (i) is identified as "proprietary" or "confidential"
when disclosed and (ii) is summarized in a writing which is marked "proprietary"
or "confidential" and is delivered to the receiving party within thirty (30)
days after the date of disclosure. Confidential Information shall not include
any information, data or material which: (a) the disclosing party expressly
agrees in writing is free of any non-disclosure obligations; (b) at the time of
disclosure to the receiving party ~vas known to the receiving party (as
evidenced by documentation in the receiving party's possession) free of any
nondisclosure obligations; (c) is independently developed by the receiving party
(as evidenced by documentation in the receiving party's possession); (d) is
lawfully received by the receiving party, free of any non-disclosure
obligations, from a third party having the right to so furnish such Confidential
Information or (e) is or becomes generally available to the public without any
breach of this Agreement or unauthorized disclosure of such Confidential
Information by the receiving party.

1.2. CUSTOMER RETAIL CHANNELS means those methods by which products are
supplied to mass retail marketers for sale solely to consumers at the retail
level.

1.3. END USER means any person or organization licensed to use, but not
to further distribute, any Konami Software.

1.4. F.C.A. means Free Carrier as defined in INCOTERMS 1990.

1.5. LICENSE FEES means the minimum royalties and additional royalties
for Konami Software distributed by Distributor pursuant to this Agreement as set
forth in Section 4 of Exhibit A ("Special Terms").

1.6. KONAMI COLLATERAL MATERIAL means documentation and related
materials as are reasonably necessary, in Konami's discretion, for Distributor's
distribution of copies of the Konami Products and as delivered by Konami to
Distributor under this Agreement.

1.7. KONAMI PRODUCTS means singly or collectively the Konami Software
and Konami Collateral Material.

1.8. KONAMI SOFTWARE means the object code version of the software
specified as "Konami Software" on Exhibit A ("Special Terms").

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1.9. KONAMI TRADEMARKS means the Konami trademarks, service marks and
logos described in Exhibit A ("Special Terms").

1.10. Territory means the geographical area set forth in Exhibit A
("Special Terms").

2. OWNERSHIP. The Confidential Information of Konami, the Konami
Products and the Konami Trademarks, and all intellectual property rights therein
shall remain the exclusive property of Konami and its suppliers. Distributor
expressly acknowledges that Konami has no rights to, and accordingly is not
licensing to Distributor hereunder any rights to distribute, the animated
characters depicted in those items of the Konami Software marked in Section 2 of
Exhibit A ("Special Terms") hereto with an asterisk ("*"), Distributor shall use
reasonable efforts to preserve such Konami and suppliers' rights and shall not
do anything to contest or impair the intellectual property rights of Konami or
its suppliers. Distributor acknowledges that all uses of the Konami Trademarks
by Distributor shall inure to the benefit of and be on behalf of Konami.
Distributor further acknowledges that the Konami Trademarks are valid under
applicable law and that Distributor's utilization of the Konami Trademarks will
not create any right, tide or interest in or to such trademarks.

3. DELIVERY AND LICENSES.

3.1. DELIVERY. To the extent reasonably available to Konami as of the
Effective Date, Konami shall deliver to Distributor copies of the Konami
Software and copies of the Konami Collateral Material. Unless otherwise agreed
by the parties, the shipping terms of such delivery shall be F.C.A. Konami's or
Nintendo's shipping faculty.

3.2. DISTRIBUTION OF KONAMI PRODUCTS. Subject to the terms and
conditions of this Agreement and payment of the applicable License Fees, Konami
hereby grants to Distributor an exclusive, non-transferable license to
distribute via Customary Retail Channels copies of the Konami Software to End
Users in the Territory; provided, Distributor shall distribute copies of the
Konami Software (1) packaged with an End User License Agreement and (2) on
tangible media appropriate for the operating system for which the Konami
Software is designed (as of the Effective Date, video game player cartridges
containing embodiments of the Konami Software in hardware) and not
electronically. Distributor agrees not to distribute the Konami Products, or (i)
with knowledge or reason to know that the Konami Products will be transported
outside of the Territory.

3.3. License to Use and Distribute Konami Collateral Material. Subject
to the terms and conditions of this Agreement, Konami hereby grants to
Distributor a non-exclusive, non-transferable license in the Territory to
reproduce, have reproduced and distribute (as appropriate and necessary for the
promotion, distribution and use of the Konami Software) the Konami Collateral
Material to End Users in connection with the distribution of the Konami Software
pursuant to Section 3.2.

4. RESTRICTIONS AND LIMITATIONS.

4.1. USE OF KONAMI TRADEMARKS. Subject to the terms and conditions of
this Agreement, Konami hereby grants to Distributor a non-exclusive, limited
license to use the Konami Trademarks on Distributor's advertising and printed
materials only for the Konami

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Products- Distributor shall display notices of trademark status (i.e., (R) or
(TM) as prescribed by Konami from time to time) adjacent to each use of the
Konami Trademarks on each piece of advertising or printed materials in which
such Konami Trademark appears. Distributor shall also include as a footnote to
the Konami Trademarks along with the first or most prominent use of each Konami
Trademark in each piece of advertising or printed materials in which such Konami
Trademark appear: "[Mark] is a trademark of Konami Corporation, which may be
registered in certain jurisdictions," and such other symbols and notices as may
be prescribed by Konami from time to time. Distributor will include the Konami
Trademarks m all advertisements, brochures, manuals or other appropriate
materials used in the promotion, distribution or use of the Konami Products.

4.2. CONVEYANCE OF LICENSE ONLY. This Agreement grants Distributor a
license only. and only such license rights as are specifically enumerated in
this Agreement. No other right, title or interest in the Konami Products, Konami
Trademarks or Confidential Information of Konami is hereby conveyed to
Distributor. Konami or its suppliers may from time to time choose to register
its copyright interests in the Konami Products, but such acts shall not cause or
be construed as causing any part thereof to become part of the public domain.

4.3. GENERAL LIMITATIONS AND RESTRICTIONS. Except as expressly
authorized in this Agreement, Distributor shall not use or reproduce any of the
Konami Products, or any portion thereof, without the express prior written
consent of Konami. Distributor shall not (i) adapt, alter, modify, translate or
create derivative works of the Konami Products, (ii) reverse compile,
disassemble or otherwise attempt to reconstruct the source code for the Konami
Software, (iii) electronically transfer the Konami Products from one computer to
another over a network or enable any timesharing of the Konami Products, (iv)
assign, plec1~e, rent, lease or loan the Konami Products, (v) obfuscate, remove
or alter any of the trademarks, trade names, logos, patent or copyright notices,
confidential or proprietary legends or other notices or markings on or in the
Konami Products, and all such markings shall be included in all copies thereof
made by Distributor (to the extent any copies arc authorized), (vi) add, or
permit any third party to add, any markings, notices or legends to the Konami
Products without Konami's express written consent, (vii) use the Konami Software
for any purpose not authorized in the documentation provided by Konami for such
Konami Software, including, without limitation, the Konami Collateral Material,
or in any manner designed to access the functionality of any portion of Konami
Software other than as permitted in the form delivered to Distributor by Konami,
or (viii) permit any third party to perform any of the foregoing prohibited
activities.

4.4. TRADEMARK RESTRICTIONS. Distributor shall not use the trademark
"Konami" or any other mark likely to cause confusion with the Konami Trademarks
as any portion of Distributor's corporate or trade name, or any trademark or
service mark for any products or services of Distributor. Distributor shall use
the Konami Trademarks solely to refer to the Konami Products. Distributor shall
not use any other trademark or service mark in close proximity to any of the
Konami Trademarks or combine the marks so as to effectively create a unitary
composite mark without the prior written approval of Konami.

4.5. RESERVATION OF RIGHTS. Konami reserves the right to license,
support, install and service its products, including, without limitation, the
Konami Products, outside of the Territory, either directly to end users or
indirectly through other sales representatives, systems integrators,

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resellers, distributors and other third parties or distribution channels, and
the right to support and service its products, including, without limitation,
the Konami Products, in the Territory, either directly to end users or
indirectly through third parties.

5. OTHER DISTRIBUTOR OBLIGATIONS.

5.1. PROCUREMENT. Unless otherwise agreed in writing by the parties,
Distributor shall be solely responsible for obtaining all hardware, operating
software and equipment necessary for the reproduction and distribution of the
Konami Collateral Materials and the distribution of the Konami Products as
contemplated by this Agreement. In no event shall Konami have any
responsibility, liability or obligation with respect to any such hardware,
software or equipment, or any problems experienced by Distributor relating to
the use of such hardware, software and equipment, including but not limited to
any non-conformance of such hardware, software and equipment with the
information available to developers of applications for operation on such
hardware, software and equipment, or any viruses, bugs or other errors that may
be resident in such software.

5.2. MARKETING EFFORTS AND TECHNICAL CAPABILITY. Distributor shall
employ, train, and maintain a staff of capable sales and technical personnel who
are adequate to: (a) aggressively introduce, promote and market the Konami
Products to their maximum potential in the Territory and (1) provide accurate
information to customers and potential End Users concerning the features and
capabilities of the Konami Products At its own expense, Distributor will
conduct, or provide for, any training of its personnel which may be necessary to
impart the knowledge necessary to fulfill the obligations set forth in this
Section 5.2.

5.3. PROMOTIONAL ACTIVITIES. Distributor, at its own expense, shall
prepare such materials as are reasonable and appropriate for the successful
marketing of the Konami Products, including product descriptions and promotional
and marketing materials. Upon Konami's request, Distributor shall provide Konami
with copies of all such materials. Konami reserves the right to reasonably
request Distributor to change any references to the Konami Products in such
materials and upon receipt of such request, Distributor shall promptly so change
such materials.

5.4. MARKETING. Distributor will use commercially reasonable efforts to
market the Konami Products. Distributor, in its sole discretion, shall establish
the license fees and other fees, if any, charged to its customers and End Users
and, subject to the terms of this Agreement, the terms and conditions of the
distribution of the Konami Products. In marketing the Konami Products,
Distributor shall:

5.4.1. Not engage in any deceptive, misleading, illegal or unethical
practices that may be detrimental to Konami or Konami's
suppliers;

5.4.2. Not make any representations, warranties or guarantees
concerning the Konami Products on behalf of Konami or Konami's
suppliers to any third party;

5.4.3. Require all of Distributor's customers to disclaim all
liability of any kind on behalf or Konami and Konami's
suppliers; and

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5.4.4. Comply with all applicable non-U.S. and U.S. federal, state
and local laws and regulations, in performing its duties.

5.5. ENFORCEMENT OF END USER LICENSE AGREEMENTS. Distributor shall
notify Konami of any breach of a material obligation under any End User License
Agreement that comes to Distributor's attention. Distributor will cooperate with
Konami in any legal action to prevent or stop unauthorized use, reproduction,
modification, distribution or sublicensing of the Konami Products,

5.6. LAWS. Distributor shall advise Konami of any legislation, rule,
regulation or other law (including but not limited to any customs, tax, trade or
tariff law) which is in effect, or which may come into effect after the
Effective Date, and which affects the importation of the Konami Products into,
or the use and the protection of the Konami Products and the associated
intellectual property rights within, any country in which Distributor is then
marketing the Konami Products. Distributor shall obtain, at its own expense, all
registrations, licenses and approvals from all authorities and agencies in the
Territory which may be needed in order for Distributor to import, market and
distribute the Konami Products. Any such applications shall identify the Konami
Products as originating from Konami and Konami's suppliers. Whenever possible,
the registration shall be made on Konami's behalf, and Konami Products shall be
registered in the name of Konami and its suppliers.

5.7. INFRINGEMENTS AND CLAIMS. Distributor shall promptly notify Konami
of (a) any actual or threatened misappropriation or infringement of Konami's or
Konami's suppliers' proprietary rights which comes to Distributor's attention
and (b) any claim or proceeding involving the Konami Products that comes to its
attention.

5.8. TRADEMARK REGISTRATIONS. Distributor, at Konami's request, shall
(a) promptly provide Konami with any specimens, (b) execute all applications for
trademark registrations, assignments or other applicable documents and (c)
perform any other act reasonably necessary to protect Konami Trademark rights in
any country in which Distributor is marketing the Konami Products.

5.9. FINANCIAL CONDITION AND CHANGE IN CONTROL. Distributor is, and
shall remain, solvent and able to pay its bills when due. Distributor will
maintain and employ sufficient working capital to carry out and perform all of
its obligations under this Agreement. At least once per calendar year, in
accordance with a schedule to be agreed upon by the parties, Distributor shall
provide Konami with an audited financial statement of Distributor's business.
Distributor shall furnish such additional financial reports and other data as
Konami may reasonably request to evaluate Distributor's financial condition.
Distributor will also notify Konami in writing not more than (****) after any
change in the management or control of Distributor (or any company directly or
indirectly controlling Distributor) where Distributor or any such controlling
company is merged, consolidated, sells all or substantially all of its assets,
or implements or suffers any substantial change in management or control (i.e.
any transfer of more than (****) of Distributor or such controlling company's
voting control).

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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6. FEES, PAYMENTS, REPORTS AND AUDITS.

6.1. FEES. All payments to be made under this Agreement are described
in and shall be made in U.S. currency to the addressee and/or bank account
specified by Konami to Distributor from time to time. Distributor shall pay
Konami fees as set forth in Exhibit A ("Special Terms") in accordance with the
terms thereof.

6.2. TAXES. The payments set forth in Exhibit A ("Special Terms") are
in consideration of the licenses set forth in Section 3 only. Distributor shall
pay, and indemnify and hold harmless Konami from, any and all national, federal,
state or local taxes, levies and assessments, including, without limitation, any
withholding taxes or stamp fees or duties, pertaining to the licenses set forth
in Section 3 or the entering into of this Agreement (except taxes based upon
Konami's net income from the distribution of the Konami Products to
Distributor). All payments due under this Agreement shall be made without any
deduction or withholding, unless such deduction or withholding is required by
any applicable law of any relevant governmental revenue authority then in
effect. If Distributor is required to deduct or withhold, Distributor will
promptly notify Konami of the requirement, pay the required amount to the
relevant governmental authority, provide Konami with an official receipt or
certified copy or other documentation acceptable to Konami evidencing the
payment, and pay to Konami, in addition to the payment to which Konami is
otherwise entitled under this Agreement, such additional amount as is necessary
to ensure that the net amount actually received by Konami free and clear of all
taxes equals the full amount Konami would have received bad no such deduction or
withholding been required. Distributor shall pay any fines, penalties or other
costs in respect of a failure to pay any of the above taxes, levies and
assessments. Distributor agrees to indemnify Konami against any amount payable
pursuant to this Section 6.2.

6.3. LATE PAYMENTS. Any invoiced amount or other payment due under this
Agreement which is not paid when due shall bear a late fee at the rate of
(****) or the maximum rate permitted by local law, whichever is less. In the
event any undisputed invoice is not paid when due, Konami shall have the further
right, at its sole option, to cease its performance of any obligations hereunder
and to exercise any rights it may have under this Agreement or otherwise.

6.4. REPORTS. With respect to all Konami Products distributed by
Distributor, Distributor shall report to Konami (a) the number of copies of such
Konami Products distributed (listed by individual product name and operating
system); the name and address of the parties receiving such copies and the date
of shipment; and (b) any other information that Konami may reasonably request
from time to tine. All such reports shall be made within thirty (30) days after
the erg! of each calendar quarter during the term of this Agreement.

6.5. RECORDS AND AUDIT BIGHTS. Distributor shall retain complete, clear
and accurate records regarding the distribution and support of the Konami
Products. Konami, or its designee(s), shall, during regular business hours at
Distributor's offices and in such a manner that does not interfere with
Distributor's normal business activities, have the right to inspect and

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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audit, or have conducted an inspection and audit of, all of the relevant
accounting and sales books and records of Distributor with regard to the number
of copies of Konami Software distributed by Distributor. Distributor shall
promptly pay the amount of any underpayments disclosed plus applicable interest
pursuant to Section 6.3. If any audit discloses underpayments of (****) or more
of the amount actually due, Distributor shall bear alt of the costs of the
audit. Konami's audit rights shall not terminate or expire until (****) after
termination or expiration of this Agreement.

7. DISCLAIMER OF WARRANTIES.

7.1. GENERAL DISCLAIMER. TILE KONAMI PRODUCTS, KONAMI TRADEMARKS AND
KONAMI COLLATERAL MATERIAL ARE BEING LICENSED AND PROVIDED TO DISTRIBUTOR "AS
IS," `WITH ALL FAULTS," WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OF THIRD
PARTY RIGHTS.

7.2. NO THIRD-PARTY WARRANTIES. DISTRIBUTOR HEREBY DISCLAIMS ANY
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, BY ANY KONAMI SUPPLIER, AND
ACKNOWLEDGES AND AGREES THAT NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
HAS BEEN MADE BY ANY KONAMI SUPPLIER UNDER THIS AGREEMENT.

8. CONFIDENTIALITY.

8.1. NON-DISCLOSURE AND NON-USE. Each party receiving Confidential
Information shall treat such information as strictly confidential, and shall use
the same care to prevent disclosure of such information as such party uses with
respect to its own confidential and proprietary information, which shall not be
less than the care a reasonable person would use under similar circumstances. In
any event, each party receiving Confidential Information shall (a) disclose such
Confidential Information to (i) only those authorized employees and directors of
such party whose duties justify their need to know such information and who have
been clearly informed of their obligation to maintain the confidential and/or
proprietary status of such Confidential Information; or (ii) only those third
parties required for the performance of the receiving party's obligations under
this Agreement pursuant to a written confidentiality agreement as least as
extensive as the confidentiality provisions of this Agreement; and (b) use such
Confidential Information only for the purposes set forth in this Agreement.

8.2. CERTAIN EXCEPTIONS. The obligations set forth in this Section 8
shall not apply to any Confidential Information which must be disclosed pursuant
to applicable federal, state or local law, regulation, court order, or other
legal process, provided the receiving party has given the disclosing party prior
written notice of such required disclosure and, to the extent reasonably
possible, has given the disclosing party an opportunity to contest such required
disclosure at the disclosing party's expense.

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(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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8.3. ADVERTISING AND PRESS RELEASES. Neither party shall advertise,
issue any press release or otherwise publish the fact that the parties have
entered into this Agreement without the prior written consent of the other
party, except as may be required by law The parties shall use their best efforts
to draft and issue a press release announcing the signing of this Agreement
after the Effective Date.. Following the issuance of such press release, Konami
may also refer to Distributor in Konami's sales and marketing materials and
presentations. The parties shall mutually agree upon other public relations and
marketing activities related to the advertising of Distributor's relationship
with Konami as set forth in this Agreement.

8.4. Terms of This Agreement. Notwithstanding anything to the contrary
in this Agreement, neither party shall disclose the terms of this Agreement
(including the fees set forth in Exhibit A ("Special Terms")) to any third party
without the express prior written consent of the other party; provided however
that either party may disclose the terms of this Agreement to its attorneys and
accountants or any potential investor, or as otherwise may be required by law.

9. INDEMNITY AND EXCEPTIONS.

9.1. Konami intellectual Property Indemnity. Subject to the provisions
of this Section 9 and Section 10 below, Konami shall at its expense defend any
action against Distributor to the extent such action is based on a claim, that
the Konami Software infringes any Berne Convention copyright, and Konami shall
pay those damages and costs finally awarded against Distributor in any such
action which are specifically attributable to such claim, or those damages and
costs agreed in any monetary settlement or compromise of such action. The
foregoing obligations are conditioned on Distributor notifying Konami promptly
in writing of such action, Distributor giving Konami sole control of the defense
thereof and any negotiations for monetary settlement or compromise thereof, and
Distributor cooperating in the defense thereof at Konami's expense. If the
Konami Software becomes, or in Konami's opinion is likely to become, the subject
of a claim of infringement or misappropriation1 then Distributor shall permit
Konami, at its option and expense, to (a) procure the right to continue using
the Konami Software (b) replace or modify the Konami Software so that it becomes
non-infringing or no longer misappropriates, or (c) terminate this Agreement.
Distributor shall not incur any costs or expenses for the account of Konami
under or pursuant to this Section 9 without Konami's express prior written
consent. THE FORE6OING STATES THE ENTIRE LIABILITY OF KONAMI FOR INFRINGEMENT
AND MISAPPROPRIATION CLAIMS AND ACTIONS.

9.2. CERTAIN EXCEPTIONS AND DISTRIBUTION INTELLECTUAL PROPERTY
INDEMNITY. Konami shall have no liability to Distributor under this Section 9 or
otherwise for any action or claim alleging infringement or misappropriation
based upon (a) any Distributor Confidential Information; (b) any use of the
Konami Software or any components of the Konami Software in a manner other than
as specified by Konami; (c) any use of the Konami Software or any components of
the Konami Software in combination with other products, equipment. devices,
software, systems or data not supplied by Konami (including without limitation
any software produced by Distributor for use with any components of the Konami
Software) to the extent that such claim is directed against such combination; or
(d) any alteration, modification or customization of any components of the
Konami Software by Distributor or any person other than Konami. In the event of
an infringement or misappropriation action or claim against Konami which is
based on any of the circumstances or conduct described in the preceding

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sentence, Distributor shall at its own expense defend such action or claim, and
Distributor shall pay any and all damages and costs finally awarded against
Konami in connection with such action or claim, or those damages and costs
agreed in any monetary settlement or compromise of such action, provided that
Konami notifies Distributor promptly in writing of such action or claim, Konami
gives Distributor sole control of the defense thereof (and. any negotiations for
settlement or compromise thereof), and Konami cooperates in the defense thereof
at Distributor's expense. Konami shall not incur any costs or expenses for the
account of Distributor under or pursuant to this Section 9.2 without
Distributor's express prior written consent.

9.3. Distributor General Indemnity. Distributor shall at its own
expense defend and indemnify Konami against all (a) claims and damages to Konami
and its suppliers arising from any use by Distributor or End Users of any
product not provided by Konami but used in combination with the Konami Products
if such claim would have been avoided by the exclusive use of the Konami
Products; (b) claims and damages due to the failure by Distributor to make all
necessary payments to Nintendo of America, Inc., Nintendo Co., Ltd., Universal,
Disney Interactive, ESPN, and/or any other parties as are required for the
manufacture, duplication, distribution and sales of the Konami Products, and (c)
damages to Konami and its suppliers caused by Distributor's breach of any of the
provisions of this Agreement or any product liability claims related to the
Konami Software as distributed by Distributor.

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10. LIMITATION OF LIABILITY. KONAMI'S AGGREGATE LIABILITY IN CONNECTION WITH
THIS AGREEMENT, THE KONAMI PRODUCTS, THE KONAMI TRADEMARKS AND CONFIDENTIAL
INFORMATION (IF KONAMI, REGARDLESS OF THE FORM OS ACTION GIVING RISE TO SUCH
LIABILITY (WHETHER IN CONTRACT, TORT OR OTHERWISE), AND INCLUDING ANY LIABILITY
UNDER SECTION 9 ABOVE, SHALL NOT EXCEED THE AGGREGATE FEES PAW BY DISTRIBUTOR TO
KONAMI UNDER THIS AGREEMENT. KONAMI SHALL NOT BE LIABLE ON ACCOUNT OF THE
TERMINATION OR EXPIRATION OF THIS AGREEMENT. KONAMI SHALL NOT BE LIABLE FOR ANY
INDIRECT, EXEMPLARY, SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY KIND
(INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF DISTRIBUTOR HAS BEEN
ADVISED OF THE FOSSIBIL1TY OF SUCH DAMAGES. DISTRIBUTOR WAIVES ANY RIGHT IT MAY
HAVE TO RECEIVE ANY COMPENSATION OR REPARATION ON TERMINATION OR EXPIRATION OF
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, LOSS OF GOODWILL, PROSPECTIVE
PROFITS, OR ANTICIPATED ORDERS, OR ON ACCOUNT OF ANY EXPENDITURES, INVESTMENTS,
LEASES OR COMMITMENTS MADE BY EITHER KONAMI OR DISTRIBUTOR. EXCEPT AS PROVIDED
IN SECTION 9 ABOVE (BUT ONLY TO TUE EXTENT AND SUBJECT TO THE LIMITATIONS SET
FORTH IN SECTION 9), KONAMI SHALL NOT BE LIABLE FOR ANY CLAIMS OF THIRD PARTIES
RELATING TO THE PRODUCTS, AND DISTRIBUTOR SHALL DEFEND KONAMI FROM, AND
INDEMNIFY AND HOLD KONAMI HARMLESS AGAINST, ALL SUCH CLAIMS. THE FOREGOING
STATES THE ENTIRE LIABILITY OF KONAMI AND KONAMI'S SUPPLIERS. THE LIMITATIONS OF
LIABILITY CONTAINED IN THIS AGREEMENT ARE A FUNDAMENTAL PART OF TUE BASIS OF
EACH PARTY'S BARGAIN HEREUNDER AND NEITHER PARTY WOULD ENTER INTO THIS AGREEMENT
ABSENT SUCH LIMITATIONS.

11. TERM AND TERMINATION.

11.1. TERM. Unless terminated earlier pursuant to the termination
Provisions in this Section 11, this Agreement shall remain in effect for (****)
from the Effective Date.

11.2. TERMINATION BY KONAMI. If any of the following circumstances
occur, Konami shall have the right to terminate this Agreement by giving written
notice to Distributor:

11.2.1. Specific Breaches. Distributor fails to perform any of
its obligations under or otherwise breaches Section 3
("Delivery and Licenses"), Section 4 ("Restrictions and
Limitations") or Section 8 ("Confidentiality") above or
upon the change of control of Distributor as set forth
in Section 5.9.

11.2.2. Other Breaches. Distributor fails to pay any amounts as
required under Section 6 ("Fees, Payments, Reports and
Audits") above and such
--------------
(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

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failure continues for a period of (****) after receipt
by Distributor of written notice from Konami of such
failure to pay; or

11.2.3. General Default. Distributor fails to perform any of its
other obligations hereunder and such failure continues
for a period of (****) after receipt by Distributor of
written notice from Konami specifying such default,

11.3. TERMINATION BY DISTRIBUTOR. Distributor shall have the right to
terminate this Agreement by giving written notice to Konami if Konami fails to
perform any of its obligations hereunder and such failure continues for a period
of (****) after receipt by Konami of written notice front Distributor specifying
such default.

11.4. EFFECT OF TERMINATION. If this Agreement expires or if either
party terminates the Agreement under Section 11.2 ("Termination by Konami") or
Section 11.3 ("Termination by Distributor"):

(a) each party shall return or destroy all Confidential
Information of the other party (and copies thereof);

(b) Distributor shall immediately cease using the Konami
Trademarks, cease marketing and distribution of the Konami Products, and
discontinue all representations that it is a Konami distributor;

(c) Distributor shall, as directly by Konami, either return or
destroy all copies of the Konami Products in Distributor's possession and/or
control;

(d) The payment date of all monies due Konami shall automatically
be accelerated so that they shall become due and payable on the effective date
of termination or expiration of this Agreement, even if longer terms have been
provided previously; and

Distributor shall deliver to Konami a certificate signed by an officer
of Distributor acknowledging that Distributor's obligations under this Section
11.4 have been fully satisfied. End Users shall be permitted the continued and
uninterrupted use for the balance of the term of their End User License
Agreements.

11.5. SURVIVAL. Section 1 ("Definitions"), Section 2 ("Ownership"),
Section 4,3 ("General Limitations and Restrictions"), Section 4.4 ("Trademark
Restrictions"), Section 5.5 ("Enforcement of End User License Agreements"),
Section 6 ("Fees, Payments, Reports and Audits"), Section 7 ("Disclaimer of
Warranties"), Section 8 ("Confidentiality"), Section 9 ("Indemnity and
Exceptions"), Section 10 ("Limitation of Liability"), Section 11.4 ("Effect of
Termination"), this Section 11.5 ("Survival"), and Section 12 ("General") of
these General Terms shall survive any expiration or termination of this
Agreement.

--------------
(*) Confidential portion omitted and filed separately with the Securities
Exchange Commission.

B-11

12. GENERAL.

12.1. "LICENSER CERTIFICATE" TO NINTENDO. Konami, if necessary, agrees
to execute and deliver to Distributor, and Distributor agrees to subsequently
deliver saint to Nintendo of America Inc. and Nintendo Co., Ltd., the "Licensor
Certificate" set forth in Exhibit C ("Certificate to Nintendo").

12.2. AUDIT RIGHTS AND FURTHER ASSURANCES. Konami and its agents shall
have the right to audit the relevant books and records of Distributor and to
make reasonable inquiries of Distributor and its customers to verify
Distributor's compliance with the provisions of this Agreement. At any time upon
the request of Konami, Distributor shall promptly and duly execute and deliver
any such further instruments and documents and take such further action as
Konami may reasonably deem desirable to obtain the full benefits of this
Agreement,

12.3. GOVERNING LAW. This Agreement shall for all purposes be governed
by and interpreted in accordance with the laws of California as those laws are
applied to contracts entered into and to be performed entirely in California by
California residents. The parties agree that the United Nations Convention on
Contracts for the International Sale of Goods is specifically excluded from
application to this Agreement. Any dispute arising from this Agreement shall be
filed in a court of competent jurisdiction in San Francisco, CA.

12.4. EXPORT CONTROL. The Konami Software is subject to the export
control laws of the United States. Distributor must comply with all applicable
export statutes and regulations, must require each End User to use the Konami
Software in accordance with all applicable export control laws, statutes and
regulations, and must. use commercially reasonable efforts not to permit any
other third party to use the Konami Software in violation of such export control
laws, statutes and regulations. Distributor acknowledges that even if Konami
consents to the use of the Konami Software outside the United States, (i)
Distributor may be required to obtain an export license prior to the export or
re-export, directly or indirectly, of the Konami Software, or any direct product
of the use thereof, or (ii) export or re-export to certain countries may be
prohibited. Distributor agrees to indemnify and hold Konami and its suppliers
harmless from any claims arising from any breach of this Section by Distributor
or any of its directors, officers, employees, customers or any third party to
whom Distributor provides access to the Konami Software.

12.5. SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable for any reason, the
remaining provisions hereof shall be unaffected and remain in full force and
effect, unless the unenforceable provisions are of such essential importance to
this Agreement that it is to be reasonably assumed that the parties would not
have entered into this Agreement without such provisions.

12.6. MODIFICATIONS. Any modification, amendment, supplement, or other
change to this Agreement must be in writing and signed by duly authorized
representatives of Konami and Distributor. As used herein, the term "Agreement"
shall include any such future modifications, amendments, supplements or other
changes hereto.

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12.7. Assignments. No right or obligation of Distributor under this
Agreement shall be assigned, delegated or otherwise transferred, whether by
agreement operation of law or otherwise without the express prior written
consent of Konami and any attempt to assign, delegate or otherwise transfer any
of Distributor's rights or obligations hereunder, without such consent, shall be
void, Subject to the preceding sentence, this Agreement shall bind each party
and its permitted successors and assigns.

12.8. WAIVERS. All waivers must be in writing. The failure of either
party to insist upon strict performance of any provision of this Agreement, or
to exercise any right provided for herein, shall not be deemed to be a waiver
for the future of such provision or right, and no waiver of any provision or
right shall affect the right of the waiving party to enforce any other provision
or right herein.

12.9. EQUITABLE REMEDIES. The parties agree that any breach of Section
3 ("Delivery and Licenses"), Section 4 ("Restrictions and Limitations") or
Section 8 ("Confidentiality") above would cause irreparable injury for which no
adequate remedy at law exists; therefore, the parties agree that equitable
remedies, including without limitation injunctive relief and specific
performance, are appropriate remedies to redress any breach or threatened breach
of Section 3 ("Delivery and Licenses"), Section 4 ("Restrictions and
Limitations") or Section 8 ("Confidentiality") above, in addition to all other
remedies available to the parties.

12.10. RIGHTS AND REMEDIES. All rights and remedies hereunder shall be
cumulative, may be exercised singularly or concurrently, and shall not be deemed
exclusive except as provided in Section 9 ("indemnity and Exceptions") above, if
any legal action is brought to enforce any obligations hereunder, the prevailing
party shall be entitled to receive its attorneys' fees, court costs and other
collection expenses, in addition to any other relief it may receive.

12.11. Force Majeure. Konami shall not be responsible for any failure
to fulfill its obligations hereunder due to causes beyond its reasonable
control, including without limitation acts or omissions of government or
military authority, acts of God, shortages of materials, transportation delays,
fires, floods, labor disturbances, riots or wars.

12.12. CONSTRUCTION. The headings and subheadings contained herein
shall not be considered a part of this Agreement. This Agreement may be executed
in several counterparts, all of which shall constitute one agreement.

12.13. NOTICES. Any notice or communication permitted or required
hereunder shall be in writing and shall be delivered in person or by courier or
sent by electronic facsimile (fax), and addressed as set forth after the
signatures to this Agreement or to such other address as shall be even in
accordance with this Section 12.13. All notices hereunder shall be effective
upon receipt.

12.14. RELATIONSHIP BETWEEN PARTIES. Konami and Distributor shall at
all times and for all purposes be deemed to be independent contractors and
neither party, nor either parry's employees, subcontractors ~r agents, shall
have the right or power to bind the other party. This Agreement shall not create
or be deemed to create a joint venture, partnership or other similar association
between Konami and Distributor or any of either party's employees,
subcontractors

B-13

or agents. Each of Konami's suppliers is a beneficiary of this Agreement and
each shall have the right to enforce its terms against Distributor.

12.15. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all prior agreements between the parties, whether written or oral,
relating to the same subject mailer,

B-14

EXHIBIT C

CERTIFICATE TO NINTENDO

C-1