Document:

Exhibit 4.2

         THIS  WARRANT AND ANY  SECURITIES  ACQUIRED  UPON THE  EXERCISE OF THIS
WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES  ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.

                     --------------------------------------

                                 THE 3DO COMPANY

                          COMMON STOCK PURCHASE WARRANT

                     --------------------------------------

         This  certifies  that,  for good and  valuable  consideration,  The 3DO
Company,  a  Delaware  corporation  (the  "Company"),  grants to  Gerard  Klauer
Mattison & Co., Inc., or registered assigns (the "Warrantholder"),  the right to
subscribe for and purchase  from the Company  Three  Hundred Six Thousand  Eight
Hundred Forty-Two (306,842) validly issued,  fully paid and nonassessable shares
(the "Warrant  Shares") of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"),  at the purchase price per share of Two and 48/100 Dollars
($2.48)  (the  "Exercise  Price"),  from time to time,  prior to 5:00 PM Eastern
Standard Time on December 10, 2006 (the "Expiration  Date"),  all subject to the
terms, conditions and adjustments herein set forth. Capitalized terms shall have
the meanings set forth in Section 18 of this Warrant.

Certificate No.:  WA-16

Number of Warrant Shares:  306,842

Name of Warrantholder:  Gerard Klauer Mattison & Co., Inc.

<PAGE>

         1. Duration and Exercise of Warrant; Limitation on Exercise; Payment of
Taxes.

            1.1  Duration  and  Exercise  of  Warrant.  Subject to the terms and
conditions set forth herein, the Warrant may be exercised,  in whole or in part,
by the Warrantholder by:

                 (a) the  surrender of this Warrant to the Company,  with a duly
executed  Exercise Form specifying the number of Warrant Shares to be purchased,
during normal  business hours on any Business Day prior to the Expiration  Date;
and

                 (b) the delivery of payment to the Company,  for the account of
the Company,  by cash, by wire  transfer of  immediately  available  funds or by
certified  or bank  cashier's  check,  of the  Exercise  Price for the number of
Warrant  Shares  specified  in the  Exercise  Form in lawful money of the United
States of America.  The Company  agrees that such Warrant Shares shall be deemed
to be issued to the Warrantholder as the record holder of such Warrant Shares as
of the close of  business  on the date on which  this  Warrant  shall  have been
surrendered and payment made for the Warrant Shares as aforesaid (or as provided
in Section 1.2 below).

            1.2 Conversion Right (Cashless Exercise).

                 (a)  In  lieu  of  the  payment  of  the  Exercise  Price,  the
Warrantholder  shall have the right  (but not the  obligation),  to require  the
Company to convert  this  Warrant,  in whole or in part,  into  shares of Common
Stock (the  "Conversion  Right")  as  provided  for in this  Section  1.2.  Upon
exercise of the Conversion Right, the Company shall deliver to the Warrantholder
(without payment by the  Warrantholder  of any of the Exercise Price;  provided,
however,  that the Warrantholder  shall be required to pay the par value for any
shares of Common Stock so delivered) that number of shares of Common Stock equal
to the  quotient  obtained by dividing  (i) the value of the Warrant at the time
the  Conversion  Right is exercised  (determined  by  subtracting  the aggregate
Exercise  Price in effect  immediately  prior to the exercise of the  Conversion
Right  from the  aggregate  Fair  Market  Value for the  shares of Common  Stock
issuable upon exercise of the Warrant  immediately  prior to the exercise of the
Conversion  Right) by (ii) the Fair  Market  Value of one share of Common  Stock
immediately prior to the exercise of the Conversion Right.

                 (b) The Conversion Right may be exercised by the  Warrantholder
on any  Business  Day prior to the  Expiration  Date by  delivering  the Warrant
Certificate,  together with a duly executed  Exercise Form (with the  conversion
section  completed),  to  the  Company,  exercising  the  Conversion  Right  and
specifying the total number of shares of Common Stock the Warrantholder  will be
issued pursuant to such conversion.

                 (c)  Fair  Market  Value  of a share  of  Common  Stock as of a
particular date (the "Determination Date") shall mean:

                      (i) If the Common Stock is listed on a national securities
exchange, then the Fair Market Value shall be the average of the "daily sales
prices" of the Common Stock on the  principal  national  securities  exchange on
which the Common  Stock is listed or  admitted  for  trading on each of the last
five (5)  Business  Days prior to the  Determination  Date,  or if not listed or
traded on any such exchange,  then the Fair Market Value shall be the average of
the "daily  sales

                                      -2-

<PAGE>

prices" of the Common Stock on the National  Market (the  "National  Market") of
the National  Association  of Securities  Dealers  Automated  Quotations  System
("Nasdaq") on each of the last five (5) Business Days prior to the Determination
Date.  The "daily sales price" shall be the closing price of the Common Stock at
the end of each day.

                      (ii) If the Common  Stock is not so listed or  admitted to
unlisted  trading  privileges or if no such sale is made on at least four (4) of
such days,  then the Fair  Market  Value  shall be the fair value as  reasonably
determined in good faith by the Company's Board of Directors or a duly appointed
committee of the Board (which  determination shall be described in detail in the
written  notice  delivered to the  Warrantholder  together with the Common Stock
certificates).  If the Warrantholder objects to the fair value determined by the
Company's Board of Directors,  the Warrantholder shall have the right to appoint
an independent appraiser (mutually consented to by the Company, such consent not
to be  unreasonably  withheld)  to  determine  the fair value.  The  independent
appraiser shall be a nationally recognized investment banking firm or nationally
recognized  expert  experienced  in the  valuation of  companies  engaged in the
business  conducted  by the  Company.  The  determination  of  such  independent
appraiser  as to the fair value shall be  controlling.  The fees and expenses of
the  independent  appraiser  shall be paid by the Company  unless the fair value
determined by the Company's Board of Directors  equals or exceeds the fair value
determined by the independent appraiser.

            1.3  Limitations  on  Exercise.   Notwithstanding  anything  to  the
contrary  herein,  this Warrant may be  exercised  only upon the delivery to the
Company of any  certificates  or other  documents  reasonably  requested  by the
Company to satisfy the Company that the proposed exercise of this Warrant may be
effected without registration under the Securities Act.

            1.4 Warrant Shares Certificate.  A stock certificate or certificates
for the Warrant Shares  specified in the Exercise Form shall be delivered to the
Warrantholder  within ten (10)  Business Days after receipt of the Exercise Form
and  the  Investment  Representation  Statement  and,  if such  exercise  is not
pursuant  to Section  1.2,  receipt of payment of the  purchase  price.  If this
Warrant shall have been exercised  only in part, the Company shall,  at the time
of  delivery  of  the  stock   certificate  or  certificates,   deliver  to  the
Warrantholder  a new Warrant  evidencing  the rights to purchase  the  remaining
Warrant  Shares,  which new Warrant shall in all other  respects be identical to
this Warrant.

            1.5  Payment of Taxes.  The  issuance  of  certificates  for Warrant
Shares shall be made without charge to the  Warrantholder for any stock transfer
or  other  issuance  tax  in  respect  thereto;  provided,   however,  that  the
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then  Warrantholder as reflected upon the books
of the Company.

            1.6 Divisibility of Warrant; Transfer of Warrant.

                 (a) Subject to the provisions of this Section 1.6, this Warrant
may be  divided  into  warrants  of one  thousand  (1,000)  shares or  multiples
thereof,  upon surrender at the principal office or the Company,  without charge
to any  Warrantholder.  Upon such  division,  the Warrants may be transferred of
record as the then Warrantholder may specify without charge to such

                                       -3-
<PAGE>

Warrantholder  (other than any applicable transfer taxes). In addition,  subject
to the  provisions  of this Section 1.6, the  Warrantholder  shall also have the
right to transfer this Warrant in its entirety to any person or entity.

                 (b) Upon  surrender  of this Warrant to the Company with a duly
executed  Assignment  Form and funds  sufficient  to pay any  transfer  tax, the
Company shall, without charge,  execute and deliver a new Warrant or Warrants of
like tenor in the name of the assignee named in such  Assignment  Form, and this
Warrant shall promptly be canceled.  Each Warrantholder agrees that prior to any
proposed  transfer  (whether as the result of a division or  otherwise)  of this
Warrant,  such  Warrantholder  shall give written  notice to the Company of such
Warrantholder's  intention  to effect  such  transfer.  Each such  notice  shall
describe the manner and  circumstances  of the proposed  transfer in  sufficient
detail, and, if reasonably  requested by the Company,  shall be accompanied by a
written  opinion of legal  counsel,  which  opinion  shall be  addressed  to the
Company and be  reasonably  satisfactory  in form and substance to the Company's
counsel,  to the  effect  that the  proposed  transfer  of this  Warrant  may be
effected  without  registration  under the  Securities  Act.  In  addition,  the
Warrantholder  and the  transferee  shall execute any  documentation  reasonably
required by the Company to ensure  compliance  with the Securities Act. The term
"Warrant"  as used in this  Agreement  shall be deemed to include  any  Warrants
issued in substitution or exchange for this Warrant.

         2. Restrictions on Transfer;  Restrictive Legends.  Except as otherwise
permitted by this Section 2, each  Warrant  shall (and each Warrant  issued upon
direct or indirect  transfer  or in  substitution  for any  Warrant  pursuant to
Section 1.6 or Section 4 shall) be stamped or otherwise  imprinted with a legend
in substantially the following form:

            THIS WARRANT AND ANY  SECURITIES  ACQUIRED UPON THE EXERCISE OF THIS
         WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED,  OR ANY STATE  SECURITIES  LAWS AND NEITHER THE SECURITIES NOR
         ANY  INTEREST  THEREIN MAY BE OFFERED,  SOLD,  TRANSFERRED,  PLEDGED OR
         OTHERWISE  DISPOSED  OF EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
         STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION
         UNDER SUCH ACT AND SUCH LAWS.

         Except as otherwise permitted by this Section 2, each stock certificate
for  Warrant  Shares  issued  upon the  exercise  of any  Warrant and each stock
certificate  issued  upon the direct or indirect  transfer  of any such  Warrant
Shares shall be stamped or otherwise  imprinted  with a legend in  substantially
the following form:

            THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE BEEN ACQUIRED
         FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION  WITH, THE SALE
         OR  DISTRIBUTION  THEREOF,  AND  HAVE  NOT BEEN  REGISTERED  UNDER  THE
         SECURITIES ACT OF 1933, AS AMENDED,  OR ANY STATE  SECURITIES  LAWS AND
         NEITHER THE SECURITIES NOR ANY INTEREST  THEREIN MAY BE OFFERED,  SOLD,
         TRANSFERRED,  PLEDGED OR  OTHERWISE  DISPOSED OF EXCEPT  PURSUANT TO AN
         EFFECTIVE  REGISTRATION

                                       -4-
<PAGE>

         STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION
         UNDER SUCH ACT AND SUCH LAWS.

         Notwithstanding  the  foregoing,  the  Warrantholder  may  require  the
Company to issue a Warrant or a stock  certificate for Warrant  Shares,  in each
case without a legend,  if: (i) such Warrant or such Warrant Shares, as the case
may be, have been  registered  for resale  under the  Securities  Act,  (ii) the
Warrantholder  has delivered to the Company an opinion of legal  counsel,  which
opinion shall be addressed to the Company and be reasonably satisfactory in form
and substance to the Company's counsel,  to the effect that such registration is
not required  with respect to such Warrant or such Warrant  Shares,  as the case
may be, or (iii) such Warrant or Warrant Shares, as the case may be, may be sold
without restriction  (including,  without limitation,  as to volume) pursuant to
Rule 144(k).

         3.  Company  Representations,  Warranties  and  Covenants.  The Company
hereby represents, warrants, covenants and agrees as follows:

            3.1 All Warrant  Shares  which are issued upon the  exercise of this
Warrant will, upon issuance,  be validly issued,  fully paid, and nonassessable,
not subject to any preemptive rights, and free from all taxes,  liens,  security
interests,  charges,  and other  encumbrances with respect to the issue thereof,
other than taxes with respect to any transfer occurring  contemporaneously  with
such issue.

            3.2 During the period  within which this  Warrant may be  exercised,
the Company will at all times have  authorized and reserved,  and keep available
free from preemptive  rights,  a sufficient  number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant.

            3.3 This  Warrant  has been  duly  authorized  and  executed  by the
Company and is a valid and binding  obligation  of the  Company  enforceable  in
accordance with its terms,  except to the extent that enforcement thereof may be
limited by (i)  bankruptcy,  insolvency,  reorganization,  moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is considered
in a  proceeding  at law or in equity)  and except to the extent  that rights to
indemnification  and  contribution  contained  in this Warrant may be limited by
federal or state securities laws on public policy relating thereto.

            3.4 The  execution  and  delivery of this  Warrant are not,  and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance  with
the terms hereof (i) will not be in violation of the  Company's  certificate  of
incorporation  or  bylaws,  (ii)  do  not  and  will  not  contravene  any  law,
governmental  rule or regulation,  judgment or order  applicable to the Company,
(iii) do not and will not  conflict  with or  contravene  any  provision  of, or
constitute a material default under, any material indenture,  mortgage, contract
or other  instrument  of which the Company is a party or by which it is bound or
(iv)  require  the  consent  or  approval  of,  the  giving  of notice  to,  the
registration or filing with or the taking of any action in respect of or by, any
federal,  state or  local  government  authority  or  agency  (other  than  such
consents,  approvals,  notices, actions or filings as have already been obtained
or made);  except in the case of each of clauses (ii),  (iii) and (iv), as could
not,

                                       -5-
<PAGE>

individually or in the aggregate,  reasonably be expected to have or result in a
material  adverse  effect on the Company's  ability to perform fully on a timely
basis all of its obligations under this Warrant.

            3.5 The  Company  shall not,  by  amendment  of its  certificate  of
incorporation  or through  any  reorganization,  transfer  of  assets,  spinoff,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
action or inaction,  seek to avoid the  observance or  performance of any of the
terms of this Warrant, and shall at all times in good faith assist in performing
and giving  effect to the terms  hereof and in the taking of all such actions as
may reasonably be requested by the  Warrantholder in order to protect the rights
of the Warrantholder against dilution or other impairment.

         4.  Warrantholder   Representations,   Warranties  and  Covenants.  The
Warrantholder represents and warrants to the Company that:

            4.1  Authorization.  The person  signing this Warrant has full power
and  authority to enter into this Warrant on behalf of the  Warrantholder.  When
executed and delivered,  this Warrant will constitute the Warrantholder's  valid
and legally binding  obligation,  except to the extent that enforcement  thereof
may be limited by (i)  bankruptcy,  insolvency,  reorganization,  moratorium  or
similar laws now or hereafter in effect relating to creditors'  rights generally
and (ii) general principles of equity  (regardless of whether  enforceability is
considered  in a  proceeding  at law or in equity) and except to the extent that
rights to  indemnification  and  contribution  contained  in this Warrant may be
limited by federal or state securities laws on public policy relating thereto.

         4.2 Investment Representations.

                 (a) The  Warrantholder  understands  that the  Warrant  and the
Warrant Shares have not been  registered  under the Securities  Act, and will be
issued  pursuant to an exemption from  registration  contained in the Securities
Act  based  in part  upon the  representations  of the  Warrantholder  contained
herein,  and can be transferred in the absence of registration  only pursuant to
an exemption  from  registration,  Rule 144 under the  Securities  Act or if the
Company receives an opinion of counsel that such registration is not required.

                 (b) The  Warrantholder is acquiring the Warrant and the Warrant
Shares  solely for its own  account and not as a nominee for any other party and
not with a view toward the resale or  distribution  thereof in  violation of the
securities laws; provided,  however, that by making the representations  herein,
the  Warrantholder  does not agree to hold this  Warrant  or any of the  Warrant
Shares for any minimum or other  specific term and reserves the right to dispose
of this  Warrant  and the  Warrant  Shares  at any  time in  accordance  with or
pursuant to a registration statement or an exemption under the Securities Act.

                 (c) The  Warrantholder  is experienced in evaluating  companies
such  as  the  Company,  is  able  to  fend  for  the  Warrantholder's  self  in
transactions such as the one contemplated by the Warrant, has such knowledge and
experience in financial and business  matters that the  Warrantholder is capable
of evaluating the merits and risks of the Warrantholder's prospective investment
in the  Company,  and  has  the  ability  to  bear  the  economic  risks  of the
investment,  including a complete loss of the  Warrantholder's  investment.  The
Warrantholder has been afforded

                                       -6-
<PAGE>

an  opportunity  to ask such  questions of the  Company's  officers,  employees,
agents,  accountants  and  representatives  concerning  the Company's  business,
operations,  financial condition, assets, liabilities and other relevant matters
as it has deemed necessary or desirable.  The Warrantholder has received all the
information it considers  necessary or appropriate to decide whether to purchase
the Warrant and the Warrant Shares.

                 (d) The Warrantholder  acknowledges that this Warrant satisfies
the Company's  obligations to issue to the  Warrantholder a warrant  pursuant to
Section 4(b) of the letter  agreement,  dated July 5, 2001,  between the Company
and Gerard Klauer Mattison & Co., Inc., as amended.

                 (e)  Warrantholder  is an  "accredited  investor" as defined in
Rule 501(a) under the Securities Act.

                 (f) Warrantholder is not purchasing the Warrant and the Warrant
Shares as a result of or subsequent  to any  advertisement,  article,  notice or
other  communication  regarding the Warrant and the Warrant Shares  published in
any newspaper,  magazine or similar media or broadcast over  television or radio
or  presented  at any  seminar  or any other  general  solicitation  or  general
advertisement.

         5. Loss or  Destruction  of  Warrant.  Upon  receipt by the  Company of
evidence  reasonably  satisfactory  to it of the  loss,  theft,  destruction  or
mutilation of this Warrant and, in the case of loss,  theft or  destruction,  of
such bond or indemnification as the Company may reasonably require,  and, in the
case of such mutilation,  upon surrender and  cancellation of this Warrant,  the
Company will execute and deliver a new Warrant of like tenor.

         6.  Ownership of Warrant.  The Company may deem and treat the person in
whose  name  this  Warrant  is   registered  as  the  holder  and  owner  hereof
(notwithstanding  any  notations of  ownership or writing  hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the  contrary,  until  presentation  of  this  Warrant  for  registration  of
transfer.

         7. Certain Adjustments.

            7.1 The number of Warrant  Shares  purchasable  upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment as follows:

                 (a)  Stock  Dividends.  If at any  time  after  the date of the
issuance  of this  Warrant  (i) the  Company  shall  fix a  record  date for the
issuance  of any stock  dividend  payable in shares of Common  Stock or (ii) the
number of shares of Common Stock shall have been  increased by a subdivision  or
split-up  of shares of Common  Stock,  then,  on the  record  date fixed for the
determination  of holders of Common Stock  entitled to receive such  dividend or
immediately  after the effective  date of such  subdivision  or split up, as the
case may be, the number of shares to be delivered  upon exercise of this Warrant
will be  increased  so that the  Warrantholder  will be  entitled to receive the
number of shares of Common  Stock  that  such  Warrantholder  would  have  owned

                                       -7-
<PAGE>

immediately  following  such  action had this  Warrant  been  exercised  in full
immediately  prior thereto,  and the Exercise Price will be adjusted as provided
below in paragraph (g).

                 (b)  Combination  of Stock.  If the  number of shares of Common
Stock  outstanding  at any time after the date of the  issuance of this  Warrant
shall have been decreased by a combination of the  outstanding  shares of Common
Stock,  then,  immediately  after the effective  date of such  combination,  the
number of shares of Common Stock to be delivered  upon  exercise of this Warrant
will be  decreased  so that the  Warrantholder  thereafter  will be  entitled to
receive the number of shares of Common Stock that such Warrantholder  would have
owned immediately  following such action had this Warrant been exercised in full
immediately  prior thereto,  and the Exercise Price will be adjusted as provided
below in paragraph (g).

                 (c) Reorganization,  Merger, etc. If any capital reorganization
of the Company,  any  reclassification of the Common Stock, any consolidation of
the Company with or merger of the Company with or into any other person,  or any
sale or lease or other transfer of all or substantially all of the assets of the
Company to any other person (each, a "Transaction"), shall be effected in such a
way that the holders of Common Stock shall be entitled to receive  stock,  other
securities or assets (whether such stock,  other securities or assets are issued
or distributed by the Company or another  person) with respect to or in exchange
for Common Stock, then, upon exercise of this Warrant,  the Warrantholder  shall
have the right to receive  the kind and  amount of stock,  other  securities  or
assets  receivable upon such  Transaction by a holder of the number of shares of
Common Stock that such  Warrantholder  would have been  entitled to receive upon
exercise of this  Warrant had this Warrant  been  exercised in full  immediately
before  such  Transaction.   The  Company  shall  execute  and  deliver  to  the
Warrantholder   at  least  ten  (10)  Business  Days  prior  to  effecting  such
Transaction a certificate setting forth the Warrantholder's  rights as set forth
in the preceding  sentence.  No Transaction shall be consummated unless adequate
provision (in the reasonable  opinion of the Warrantholder) has been made in the
definitive  agreement for the adjustments set forth herein and for the successor
entity in any such  Transaction to assume the Company's  obligations  hereunder.
The  provisions  of this Section  7.1(c)  shall  similarly  apply to  successive
Transactions.

                 (d) Stock and Rights Offering at Less than Fair Market Value or
Exercise Price.

                      (i) If at any  time  after  the date of  issuance  of this
Warrant,  the Company shall issue or sell  Additional  Securities at a price per
share (or having a  conversion,  exchange or  exercise  price per share) that is
less than (x) the  Exercise  Price or (y) the Fair  Market  Value (as defined in
Section 1.2(c)  hereof),  in either case on the date of such issuance or sale or
on such record date then, immediately after the date of such issuance or sale or
such record  date,  the  Exercise  Price shall be adjusted by reducing it to the
lower of the following prices:

                         (I) the  price  calculated  by  dividing  (A) an amount
         equal  to the  sum  of  (x)  the  number  of  shares  of  Common  Stock
         outstanding immediately prior to such issue or sale or fixing of record
         date (on an as if converted  basis,  including  the number of shares of
         Common Stock issuable upon  conversion or exchange of any  obligations,
         any  shares  of stock or other  security  of the  Company  or any other
         security  convertible into or

                                       -8-
<PAGE>

         exchangeable  for any security  convertible  into or  exchangeable  for
         Common Stock of the Company),  multiplied by the then existing Exercise
         Price,  plus (y) the aggregate  consideration,  if any, received by the
         Company  upon such issue or sale,  by (B) the total number of shares of
         Common Stock outstanding immediately after such issue or sale or fixing
         of record date (on an as if converted  basis,  including  the number of
         shares of Common  Stock  issuable  upon  conversion  or exchange of any
         obligations,  any shares of stock or other  security  of the Company or
         any other security  convertible  into or exchangeable  for any security
         convertible into or exchangeable for Common Stock of the Company); and

                         (II)  the  price  calculated  by  multiplying  the then
         existing  Exercise  Price by a fraction,  (A) the numerator of which is
         the sum of (x)  the  number  of  shares  of  Common  Stock  outstanding
         immediately prior to such issue or sale or fixing of record date (on an
         as if converted  basis,  including the number of shares of Common Stock
         issuable upon conversion or exchange of any obligations,  any shares of
         stock  or  other   security  of  the  Company  or  any  other  security
         convertible into or exchangeable  for any security  convertible into or
         exchangeable  for Common Stock of the Company)  multiplied  by the Fair
         Market Value per share of Common Stock  immediately prior to such issue
         or sale or  fixing  of  record  date  plus (y) the  cash  consideration
         received  by  the  Company  upon  such  issue  or  sale,  and  (B)  the
         denominator  of which is the total  number  of  shares of Common  Stock
         outstanding  immediately  after  such issue or sale or fixing of record
         date (on an as if converted  basis,  including  the number of shares of
         Common Stock issuable upon  conversion or exchange of any  obligations,
         any  shares  of stock or other  security  of the  Company  or any other
         security  convertible into or exchangeable for any security convertible
         into or  exchangeable  for Common Stock of the Company)  times the Fair
         Market Value per share of Common Stock  immediately prior to such issue
         or sale or fixing of record date.

                      (ii) If the Company  shall,  at any time after the date of
issuance of this Warrant,  fix a record date to distribute to all holders of its
Common  Stock any shares of capital  stock of the  Company  (other  than  Common
Stock) or evidences of its indebtedness or assets  (including all cash dividends
or other  distributions,  whether paid from retained  earnings of the Company or
otherwise)  or  rights or  warrants  to  subscribe  for or  purchase  any of its
securities  (excluding  those referred to in paragraph  (d)(i) above),  then the
Warrantholder shall be entitled to receive,  upon exercise of the Warrant,  that
portion  of such  distribution  to which it would  have  been  entitled  had the
Warrantholder  exercised  its  Warrant  immediately  prior  to the  date of such
distribution.  At the time it fixes the record date for such  distribution,  the
Company  shall  allocate  sufficient  reserves  to ensure  the  timely  and full
performance  of the  provisions  of this Section  7.1(d)(ii).  The Company shall
promptly  (but in any case no later  than five (5)  Business  Days  prior to the
record date of such distribution) mail by first class,  postage prepaid,  to the
Warrantholder, notice that such distribution will take place.

                 (e) Fractional  Shares. No fractional shares of Common Stock or
scrip shall be issued to any  Warrantholder  in connection  with the exercise of
this  Warrant.  Instead  of any  fractional  shares of Common  Stock  that would
otherwise  be  issuable  to such  Warrantholder,  the  Company  will pay to such
Warrantholder  a cash  adjustment in respect of such  fractional  interest in an
amount equal to that  fractional  interest of the then current Fair Market Value
per share of Common Stock.

                                       -9-
<PAGE>

                 (f)  Carryover.  Notwithstanding  any other  provision  of this
Section 7, no  adjustment  shall be made to the number of shares of Common Stock
to be  delivered  to the  Warrantholder  (or  to the  Exercise  Price)  if  such
adjustment  represents  less than 1% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the time
and  together  with the  next  subsequent  adjustment  which  together  with any
adjustments  so  carried  forward  shall  amount to 1% or more of the  number of
shares to be so delivered.

                 (g) Exercise Price  Adjustment.  Whenever the number of Warrant
Shares  purchasable upon the exercise of this Warrant is adjusted as provided in
this Section 7.1 (other than  pursuant to Section  7.1(h)),  the Exercise  Price
payable upon the exercise of this Warrant shall be adjusted by multiplying  such
Exercise Price immediately prior to such adjustment by a fraction,  of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant  immediately prior to such adjustment,  and of which the denominator
shall be the number of Warrant Shares purchasable immediately thereafter.

                 (h)  Adjustment of Number of Warrant Shares  Purchasable.  Upon
any adjustment of the Exercise Price as provided in this Section 7.1 (other than
pursuant to Section  7.1(g)),  the holder hereof shall thereafter be entitled to
purchase,  at the Exercise Price resulting from such  adjustment,  the number of
shares of Common Stock  (calculated to the nearest .001 of a share)  obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock purchasable  hereunder immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.

            7.2 Notice of Adjustments.  Whenever the number of Warrant Shares or
the Exercise Price of such Warrant Shares is adjusted,  as herein provided,  the
Company  shall  promptly  mail  by  first  class,   postage   prepaid,   to  the
Warrantholder,  notice of such  adjustment or adjustments and a certificate of a
firm of independent public accountants of recognized  national standing selected
by the  Board  of  Directors  of the  Company  (who  shall be  appointed  at the
Company's expense and who may be the independent  public  accountants  regularly
employed  by the  Company)  setting  forth in  reasonable  detail  the number of
Warrant  Shares  and the  Exercise  Price  of such  Warrant  Shares  after  such
adjustment,  a brief statement of the facts requiring such  adjustment,  and the
computation by which such adjustment was made.

            7.3 Notice of Extraordinary  Corporate  Events.  In case the Company
after the date hereof shall  propose to (a)  distribute  any  dividend  (whether
stock or cash or  otherwise) to the holders of shares of Common Stock or to make
any other  distribution  to the holders of shares of Common Stock,  (b) offer to
the holders of shares of Common Stock  rights to  subscribe  for or purchase any
additional  shares of any class of stock or any other rights or options,  or (c)
effect any  reclassification  of the Common Stock (other than a reclassification
involving merely the subdivision or combination of outstanding  shares of Common
Stock),  any capital  reorganization,  any consolidation or merger (other than a
merger in which no distribution of securities or other property is to be made to
holders of shares of Common Stock),  any sale,  transfer or other disposition of
all  or  substantially  all  of  its  property,  assets  and  business,  or  the
liquidation,  dissolution or winding up of the Company, then, in each such case,
the Company shall mail to each  Warrantholder  notice of such  proposed  action,
which notice shall  specify the date on which (i) the books of the Company shall
close, or (ii) a record

                                      -10-
<PAGE>

shall be taken for  determining  the holders of Common Stock entitled to receive
such stock dividends or other  distribution or such rights or options,  or (iii)
such reclassification,  reorganization,  consolidation,  merger, sale, transfer,
other  disposition,  liquidation,  dissolution or winding up shall take place or
commence,  as the case may be, and the date,  if any, as of which it is expected
that holders of record of Common  Stock shall be entitled to receive  securities
or other property  deliverable upon such action.  Such notice shall be mailed at
least ten (10) days prior to the record date for  determining  holders of Common
Stock for purposes of receiving such payment or offer.

            7.4 Effect of Failure to Notify.  Failure to file any certificate or
notice or to mail any  notice,  or any  defect  in any  certificate  or  notice,
pursuant  to Sections  7.2 and 7.3 shall not affect the  legality or validity of
the  adjustment to the Exercise  Price,  the number of shares  purchasable  upon
exercise of this Warrant, or any transaction giving rise thereto.

            7.5  Other  Dilutive  Events.  If  any  event  occurs  of  the  type
contemplated by the provisions of Section 7.1 but not expressly  provided for by
such  provisions   (including,   without  limitation,   the  granting  of  stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this  Warrant so as to protect  the  rights of the  holders of this  Warrant;
provided that no such  adjustment  will increase the Exercise  Price or decrease
the number of shares of Common Stock obtainable as otherwise determined pursuant
to this Section 7.

         8. Registration Rights.

            8.1 Form S-3 Registration.  Reference is hereby made to that certain
Registration  Rights  Agreement  dated as of the date hereof (the  "Registration
Rights  Agreement"),  by and  among  the  Company  and the  Buyers  (as  defined
therein).  The  Warrantholder  shall have the same Form S-3 registration  rights
with respect to the Registrable  Securities as the "Investors" (as defined under
the Registration Rights Agreement) under the Registration Rights Agreement,  and
the terms and  provisions  of  Sections  2(a)-(e),  3 and 4 of the  Registration
Rights Agreement (captioned "Registration") shall apply to the Warrantholder and
its Registrable Securities with the Warrantholder holding the same rights as the
"Investors"  under  Sections  2(a)-(e),  3  and  4 of  the  Registration  Rights
Agreement;  provided,  that, for purposes of such  application,  "Legal Counsel"
shall  mean  Morrison  &  Foerster  LLP or  such  other  counsel  as  thereafter
designated by the holders of a majority of the Registrable Securities.

            8.2 Incidental Registration.

                 (a)  Notice  of  Registration.  If at any time or from  time to
time, the Company shall determine to register any of its securities,  either for
its  own  account  or  the  account  of a  security  holder  other  than  (i)  a
registration  relating  solely to employee  benefit  plans,  (ii) a registration
relating  solely to a merger,  acquisition  or  exchange,  (iii) a  registration
relating  solely  to  a  convertible   debt  transaction  or  (iv)  a  Form  S-3
registration pursuant to Section 8.1, the Company will:

                      (i) promptly give to the Holders  written notice  thereof;
and

                                      -11-
<PAGE>

                      (ii)  include  in  such   registration  (and  any  related
qualification under blue sky laws or other compliance),  and in any underwriting
involved therein, all the Registrable  Securities specified in a written request
or requests made within  twenty (20) days after  receipt of such written  notice
from the Company by any Holder.

                 (b)  Underwriting.  If the  registration  of which the  Company
gives notice is for a registered public offering involving an underwriting,  the
Company  shall so advise  the  Holders  as a part of the  written  notice  given
pursuant  to  Section  8.2(a)(i).  In such  event,  the  right of any  Holder to
registration  pursuant to Section 8.2 shall be  conditioned  upon such  Holder's
participation in such  underwriting and the inclusion of Registrable  Securities
in the  underwriting to the extent  provided  herein.  All Holders  proposing to
distribute their securities  through such underwriting  shall (together with the
Company  and the  other  holders  distributing  their  securities  through  such
underwriting)  enter into an  underwriting  agreement in customary form with the
managing  underwriter  selected for such  underwriting by the Company (or by the
holders   who  have   demanded   such   registration,   as  the  case  may  be).
Notwithstanding  any  other  provision  of this  Section  8.2,  if the  managing
underwriter  determines in its sole discretion that marketing  factors require a
limitation of the number of shares to be underwritten,  the Company will include
in such registration and  underwriting,  to the extent of the number and type of
securities that the Company is so advised can be sold in (or during the time of)
such offering,  first, all securities proposed by the Company to be sold for its
own account,  second, such other securities  requested to be registered on a pro
rata  basis  based  on  the  total  number  of  securities  (including,  without
limitation,  Registrable Securities owned by each participating Holder) entitled
to be included in such registration,  third, all Other Securities proposed to be
registered.  To facilitate the allocation of shares in accordance with the above
provisions,  the  Company  or the  underwriters  may round the  number of shares
allocated to any Holder or other holder to the nearest 100 shares. If any Holder
or other holder disapproves of the terms of any such underwriting, he or she may
elect to withdraw  therefrom  by written  notice to the Company and the managing
underwriter.  Any securities  excluded or withdrawn from such underwriting shall
be withdrawn  from such  registration,  and shall not be transferred in a public
distribution  prior to ninety  (90) days after the date of the final  prospectus
included in the registration statement relating thereto.

                 (c) Right to Terminate Registration. The Company shall have the
right to  terminate  or withdraw  any  registration  initiated  by it under this
Section 8.2 prior to the effectiveness of such registration,  whether or not any
Holder has elected to include securities in such registration.

         9. Obligations of the Company.

         In connection with the  registration  of the Registrable  Securities as
contemplated by Section 8.2, the Company shall:

            9.1  Prepare  and file with the SEC a  Registration  Statement  with
respect to the  securities to be sold by the Company or on account of a security
holder  together with the  Registrable  Securities to be sold by the  requesting
Holders, promptly (and in any event within forty-five (45) days of delivery of a
written notice from a requesting Holder to register Registrable  Securities) and
thereafter  use its best efforts to cause the  Registration  Statement to become
effective, which Registration Statement (including any amendments or supplements
thereto and prospectuses

                                      -12-
<PAGE>

contained  therein),  in each case,  shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;

            9.2  Prepare  and  file  with  the SEC  such  amendments  (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus  used  in  connection  with  the  Registration  Statement  as  may be
necessary to keep the  Registration  Statement  effective and to comply with the
provisions  of  the  Securities  Act  with  respect  to the  disposition  of all
Registrable  Securities covered by the Registration Statement until such time as
all of such Registrable  Securities have been disposed of in accordance with the
intended  methods of disposition  by the seller or sellers  thereof set forth in
the Registration Statement;

            9.3 Furnish to each Holder whose Registrable Securities are included
in the  Registration  Statement  (without  charge to the Holders) such number of
copies of a prospectus,  including a preliminary  prospectus  and all amendments
and supplements thereto and such other documents,  as such Holder may reasonably
request in order to facilitate  the  disposition of the  Registrable  Securities
owned by such Holder;  the Company consents to the use of the prospectus and any
amendment or supplement  thereto by each Holder in connection  with the offering
and the sale of the  Registrable  Securities  covered by the  prospectus  or any
amendment or supplement thereto;

            9.4 Use its best efforts to (a) register and qualify the Registrable
Securities covered by the Registration  Statement under such other securities or
Blue Sky laws of such  jurisdictions  as the  Holders  who  hold a  majority  in
interest of the Registrable  Securities reasonably request, (b) prepare and file
in  those  jurisdictions  all  required  amendments  (including   post-effective
amendments) and supplements,  (c) take such other actions as may be necessary to
maintain  such  registrations  and  qualifications  in  effect  at all times the
Registration  Statement is in effect and (d) take all other actions necessary or
advisable  to  enable  the   disposition   of  such   securities   in  all  such
jurisdictions;  provided,  however,  that the  Company  shall not be required in
connection  therewith or as a condition thereto to qualify to do business in any
jurisdiction  where it would not  otherwise  be required to qualify but for this
Section 9.4;

            9.5 In the event of an underwritten offering, enter into and perform
its obligations under an underwriting agreement with the managing underwriter of
such  offering,  in usual and customary  form,  including,  without  limitation,
customary indemnification and contribution  obligations,  and in the case of any
non-underwritten  offering,  provide  to  broker-dealers  participating  in  any
distribution of Registrable Securities reasonable indemnification  substantially
similar to that provided by Section 12.1;

            9.6  Promptly  notify each Holder of the  happening  of any event of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements  therein,  in light of the  circumstances  then
existing,  not  misleading,  and use its best  efforts  to  prepare  promptly  a
supplement  or  amendment to the  Registration  Statement to correct such untrue
statement  or  omission,  and deliver a number of copies of such  supplement  or
amendment to each Holder as such Holder may reasonably request;

                                      -13-
<PAGE>

            9.7  Promptly  notify each Holder who holds  Registrable  Securities
being  sold  (and,  in the  event  of an  underwritten  offering,  the  managing
underwriters)  of the issuance by the SEC of any stop order or other  suspension
of  effectiveness  of the  Registration  Statement,  and use its best efforts to
obtain  the  withdrawal  of  any  order  suspending  the  effectiveness  of  the
Registration Statement at the earliest possible time;

            9.8  Permit  a  single  firm  of  counsel   designated   as  selling
stockholders'  counsel by the  Holders  who hold a majority  in  interest of the
Registrable  Securities being sold to review the Registration  Statement and all
amendments and  supplements  thereto a reasonable  period of time prior to their
filing  with the SEC,  and shall not file any  document  in a form to which such
counsel reasonably objects;

            9.9 Make  generally  available  to its  security  holders as soon as
practicable,  but not later than  ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month  period beginning not
later than the first day of the  Company's  fiscal  quarter next  following  the
effective date of the Registration Statement;

            9.10 At the reasonable request of the Holders who hold a majority in
interest of the  Registrable  Securities  being  sold,  furnish on the date that
Registrable  Securities are delivered to an  underwriter  for sale in connection
with  the  Registration  Statement  (a) a  letter,  dated  such  date,  from the
Company's independent certified public accountants,  in form and substance as is
customarily given by independent certified public accountants to underwriters in
an  underwritten  public  offering,  addressed to the  underwriters;  and (b) an
opinion,  dated such date, from counsel representing the Company for purposes of
such  Registration  Statement,  in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters;

            9.11 Make  available for inspection by any Holder,  any  underwriter
participating in any disposition pursuant to the Registration Statement, and any
attorney,  accountant, or other agent retained by any such Holder or underwriter
(collectively,  the  "Inspectors"),  all pertinent  financial and other records,
pertinent  corporate  documents  and  properties  of the  Company,  as  shall be
reasonably  necessary to enable each  Inspector  to exercise  its due  diligence
responsibility,  and cause the  Company's  officers,  directors and employees to
supply all information  reasonably requested by any such Inspector in connection
with the Registration Statement;

            9.12 Use its best  efforts  either to (a) cause all the  Registrable
Securities  covered  by the  Registration  Statement  to be listed on a national
securities exchange and on each additional national securities exchange on which
similar securities issued by the Company are then listed, if any, if the listing
of such  Registrable  Securities  is then  permitted  under  the  rules  of such
exchange or (b) secure designation of all the Registrable  Securities covered by
the  Registration  Statement as a Nasdaq  "National  Market Security" within the
meaning  of  Rule  11Aa2-l  of the  SEC and  the  quotation  of the  Registrable
Securities on the Nasdaq National Market;

            9.13 Provide a transfer agent and  registrar,  which may be a single
entity, for the Registrable  Securities not later than the effective date of the
Registration  Statement;

                                      -14-
<PAGE>

            9.14  Cooperate  with the  Holders who hold  Registrable  Securities
being sold and the managing  underwriter or underwriters,  if any, to facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legends)  representing  Registrable  Securities  to  be  sold  pursuant  to  the
Registration  Statement and enable such certificates to be in such denominations
or amounts,  as the case may be, and  registered  in such names as the  managing
underwriter or underwriters, if any, or the Holders may reasonably request;

            9.15  Promptly  notify  each  Holder  when  the  prospectus  or  any
prospectus  supplement  or  post-effective  amendment  has been filed,  and with
respect to the Registration  Statement or any post-effective  amendment thereto,
when the same has become effective;  and 9.16 Take all other reasonable  actions
necessary  to  expedite  and  facilitate  disposition  by  the  Holders  of  the
Registrable Securities pursuant to the Registration Statement.

         10. Obligations of the Holders.

         In  connection  with the  registration  of  Registrable  Securities  as
contemplated by Section 8.2, each Holder agrees as follows:

            10.1 Each Holder,  by its acceptance of the Registrable  Securities,
agrees  to  reasonably  cooperate  with  the  Company  in  connection  with  the
preparation and filing of any  registration  statement under Section 8.2, unless
such Holder has decided not to participate.

            10.2 No Holder  may  participate  in any  underwritten  registration
hereunder  unless  such  Holder  (a)  agrees to sell such  Holder's  Registrable
Securities on the basis provided in any  underwriting  arrangements set forth in
Section  8.2(b),  (b)  completes  and  executes  all  questionnaires,  powers of
attorney,  indemnities,  underwriting  agreements and other documents reasonably
required under the terms of such underwriting arrangements and (c) agrees to pay
such Holder's pro rata portion of all underwriting discounts and commissions.

            10.3 Holder agrees that the Company may suspend  offers and sales or
delay the  effectiveness  of any registration  statement,  an aggregate of up to
twenty (20) Business Days in any 12-month period  (provided no suspension  shall
exceed five  consecutive  Business  Days),  if the Company's  Board of Directors
determines, in good faith, that such delay would be necessary to avoid premature
disclosure of any material acquisition,  disposition,  business combination,  or
other material  transaction or information or  circumstances  exist that make it
impractical or inadvisable to amend or supplement the registration statement.

         11. Expenses of  Registration.  All Registration  Expenses  incurred in
connection with  registrations  pursuant to Section 8.1 or 8.2 shall be borne by
the  Company.   Unless  otherwise  stated,  all  Selling  Expenses  relating  to
securities  registered on behalf of the Holders shall be borne by the Holders of
the registered securities included in such registration pro rata on the basis of
the number of shares so registered.

                                      -15-
<PAGE>

         12.  Indemnification.  In the  event  any  Registrable  Securities  are
included in a Registration Statement under this Agreement:

            12.1 To the extent  permitted by law, the Company will indemnify and
hold harmless each Holder who holds such Registrable Securities,  the directors,
if any, of such  Holder,  the  officers,  if any, of such  Holder,  who sign the
Registration Statement, and each person, if any, who controls such Holder (each,
an  "Indemnified  Holder"),  against  any  losses,  claims,  damages,  expenses,
liabilities (joint or several) (collectively, "Claims") to which any of them may
become subject under the Securities Act or the Securities  Exchange Act of 1934,
as amended (the "Exchange Act") or otherwise, insofar as such Claims (or actions
or proceedings,  whether commenced or threatened,  in respect thereof) arise out
of or are based upon any of the  following  statements,  omissions or violations
(collectively,  a  "Violation"):  (a) any untrue  statement  or  alleged  untrue
statement  of a material  fact  contained in the  Registration  Statement or any
post-effective  amendment thereof,  or the omission or alleged omission to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein not misleading,  (b) any untrue  statement or alleged untrue
statement of a material  fact  contained in any  preliminary  prospectus if used
prior to the effective date of such Registration  Statement, or contained in the
final  prospectus (as amended or supplemented if the Company files any amendment
thereof or supplement thereto with the SEC), or the omission or alleged omission
to state therein a material fact required to be stated therein,  or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading, or (c) any violation or alleged violation by the
Company of the Securities  Act, the Exchange Act, any state  securities  law, or
any rule or regulation  promulgated  under the Securities Act, the Exchange Act,
or any state  securities law.  Subject to the  restrictions set forth in Section
12.3 with respect to the number of legal  counsel,  the Company shall  reimburse
the Holders and each such  underwriter or controlling  person,  promptly as such
expenses  are  incurred  and are due and  payable,  for any legal  fees or other
reasonable  expenses  incurred  by  them in  connection  with  investigating  or
defending any such Claim, whether or not such claim, investigation or proceeding
is brought or initiated by the Company or a third party.  If multiple claims are
brought  against  an  Indemnified  Holder  in  an  arbitration  proceeding,  and
indemnification is permitted under applicable law and is provided for under this
Section 12 with respect to at least one such claim,  the Company agrees that any
arbitration award shall be conclusively deemed to be based on claims as to which
indemnification  is  permitted  and  provided  for,  except  to the  extent  the
arbitration  award expressly states that the award, or any portion  thereof,  is
based  solely  on  a  claim  as  to  which  indemnification  is  not  available.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained in this Section 12.1 (w) shall not apply to a Claim arising
out of or based upon a Violation  which  occurs  solely in reliance  upon and in
conformity  with  information  furnished  in  writing  to  the  Company  by  any
Indemnified  Holder  expressly for use in connection with the preparation of the
Registration  Statement or any such amendment thereof or supplement thereto; (x)
with respect to any  preliminary  prospectus,  shall not inure to the benefit of
any such  person from whom the person  asserting  any such Claim  purchased  the
Registrable  Securities  that are the subject  thereof (or to the benefit of any
person  controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or  supplemented,  if such  prospectus was timely made available by
the Company  pursuant to Section 3(d) of the  Registration  Rights  Agreement or
Section 9.3, and the Indemnified  Holder was promptly  advised in writing not to
use the  incorrect  prospectus  prior to the use giving rise to a violation  and
such Indemnified Holder,  notwithstanding such advice, used it;

                                      -16-
<PAGE>

(y) shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the  Company,  if such  prospectus  was timely  made  available  by the  Company
pursuant to Section 3(d) of the  Registration  Rights  Agreement or Section 9.3;
and (z) shall  not  apply to  amounts  paid in  settlement  of any Claim if such
settlement is effected  without the prior written consent of the Company,  which
consent shall not be unreasonably withheld.  Such indemnity shall remain in full
force and effect  regardless  of any  investigation  made by or on behalf of the
Indemnified Holder and shall survive the transfer of the Registrable  Securities
by the Holders pursuant to Section 15.

            12.2 In connection with any Registration Statement in which a Holder
is participating, each such Holder agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 12.1, the Company,  each
of its directors, each of its officers who sign the Registration Statement, each
person,  if any, who controls the Company  within the meaning of the  Securities
Act or the  Exchange  Act, any  underwriter  and any other  stockholder  selling
securities  pursuant to the  Registration  Statement or any of its  directors or
officers or any person who controls such  stockholder  or  underwriter  (each, a
"Company  Indemnified  Party" and  collectively and together with an Indemnified
Holder,  an  "Indemnified  Party"),  against  any Claim to which any of them may
become subject, under the Securities Act, the Exchange Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation,  in each case to the
extent (and only to the extent) that such  Violation  occurs  solely in reliance
upon and in conformity with written information furnished to the Company by such
Holder  expressly for use in connection with such  Registration  Statement;  and
such Holder will  reimburse any legal or other expenses  reasonably  incurred by
them in connection  with  investigating  or defending any such Claim;  provided,
however,  that the indemnity  agreement contained in this Section 12.2 shall not
apply to amounts paid in settlement of any Claim if such  settlement is effected
without the prior  written  consent of such Holder,  which  consent shall not be
unreasonably withheld;  provided,  further, that the Holder shall in no event be
liable  under this  Section  12.2 for any amount of a Claim that exceeds the net
proceeds  to such  Holder  as a  result  of the sale of  Registrable  Securities
pursuant  to  such  Registration  Statement.  Notwithstanding  anything  to  the
contrary  contained  herein,  the  indemnification  agreement  contained in this
Section 12.2 with respect to any preliminary  prospectus  shall not inure to the
benefit of any Company  Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary  prospectus was corrected on a timely
basis in the prospectus, as then amended or supplemented.

            12.3  Promptly  after  receipt by an  Indemnified  Party  under this
Section  12  of  notice  of  the  commencement  of  any  action  (including  any
governmental  action),  such  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against any  indemnifying  party  under this  Section 12,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
satisfactory to the Indemnified Parties; provided,  however, that an Indemnified
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying  party, if, in the reasonable  opinion of counsel
for the  Indemnified  Party,  representation  of such  Indemnified  Party by the
counsel retained by the indemnifying  party would be inappropriate due to actual
or potential  differing  interests  between such Indemnified Party and any other
party  represented  by  such  counsel  in such  proceeding.  The  failure  by an
Indemnified  Party to deliver written notice to the indemnifying  party within a
reasonable  time of the  commencement  of any such

                                      -17-
<PAGE>

action  shall  not  relieve  such  indemnifying  party of any  liability  to the
Indemnified  Party under this Section 12, except to the extent that such failure
to notify  results in the  forfeiture by the  indemnifying  party of substantive
rights or  defenses.  The  indemnification  required by this Section 12 shall be
made by  periodic  payments  of the  amount  thereof  during  the  course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

         13. Contribution.  To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable  under  Section 12 to the  fullest  extent  permitted  by law;  provided,
however,  that (a) no contribution shall be made under  circumstances  where the
maker would not have been liable for  indemnification  under the fault standards
set forth in  Section  12,  (b) no seller of  Registrable  Securities  guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities  who was not  guilty  of such  fraudulent  misrepresentation  and (c)
contribution by any seller of Registrable  Securities shall be limited in amount
to the net amount of  proceeds  received  by such  seller  from the sale of such
Registrable Securities.

         14.  Reports.  Under  Securities  Exchange Act of 1934.  With a view to
making  available to the Holders the benefits of Rule 144 promulgated  under the
Securities  Act or any other  similar rule or  regulation of the SEC that may at
any time  permit the  Holders to sell  securities  of the  Company to the public
without registration ("Rule 144"), the Company agrees to:

                 (a) comply with the  requirements  of paragraph (c) of Rule 144
with respect to current public information about the Company;

                 (b) file with the SEC in a timely  manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

                 (c)  furnish  to  each  Holder  so long  as  such  Holder  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied with the  requirements  of said Rule 144(c) and the
reporting  requirements  of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements),  (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company,  and (iii) such other  information  as may be
reasonably  requested  to permit  the  Holders to sell such  securities  without
registration.

         15.  Assignment of Registration  Rights.  The right to have the Company
register Registrable  Securities pursuant to this Warrant shall be automatically
assigned by the Holders to  transferees  or  assignees  of this  Warrant or such
Registrable  Securities,  provided that  immediately  following such transfer or
assignment,  the further  disposition  of such  securities by the  transferee or
assignee would be subject to  restrictions  under the  Securities  Act. The term
"Holders" as used herein shall include permitted assignees and transferees.

         16. Amendments.  Any provision of this Warrant (including  registration
rights)  may be  amended  and  the  observance  thereof  may be  waived  (either
generally or in a particular instance and

                                      -18-
<PAGE>

either  retroactively  or  prospectively),  only with the written consent of the
Company and the  Holders  who hold a majority  in  interest  of the  Registrable
Securities.  Any amendment or waiver effected in accordance with this Section 16
shall be binding upon each Holder and the Company.

         17. Expiration of the Warrant. The right to exercise this Warrant shall
terminate on the Expiration  Date.  All terms of this Warrant  applicable to the
Warrant Shares, including, without limitation, Sections 8 through 16, inclusive,
shall survive exercise and/or expiration of this Warrant.

         18. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:

            Additional  Securities:  all shares  (including  treasury shares) of
Common  Stock,  rights,  options,   warrants,  or  convertible  or  exchangeable
securities  containing  the right to subscribe for or purchase  shares of Common
Stock, issued or sold by the Company after the date hereof,  excluding:  (i) the
Warrant Shares; (ii) any options (or shares of Common Stock issued upon exercise
of such options) issued to any employee,  officer, director or consultant of the
Company  pursuant  to a stock  option  plan  which is  approved  by the Board of
Directors   of   the   Company;   (iii)   securities   issued   pursuant   to  a
recapitalization,  reorganization  or  merger,  the sole  purpose of which is to
effect a change in the Company's jurisdiction of incorporation;  (iv) securities
issued pursuant to the bona fide  acquisition of another  business entity by the
Company by merger,  purchase of  substantially  all of the assets or shares,  or
other reorganization whereby the Company or its stockholders own not less than a
majority of the voting power of the  surviving or successor  corporation  or the
entity that controls such surviving or successor corporation;  (v) capital stock
issued in connection with any stock split, stock dividend or recapitalization by
the  Company;  (vi)  securities  issued  in  connection  with  the  transactions
contemplated by the Securities Purchase Agreement, dated as of even date hereof,
between the Company and certain purchasers  thereto,  including shares of Common
Stock issuable upon conversion or exercise of securities issued pursuant to such
Securities Purchase Agreement; and (vii) securities issued in a firm commitment,
underwritten  public  offering  with net  proceeds  to the  Company  of at least
$25,000,000.

            Assignment  Form: an Assignment  Form in the form annexed  hereto as
Exhibit C.

            Business  Day:  any day other  than a  Saturday,  Sunday or a day on
which  national  banks are  authorized  by law to close in The City of New York,
State of New York.

            Claims: the meaning specified in Section 12.1.

            Common Stock: the meaning specified on the cover of this Warrant.

            Company: the meaning specified on the cover of this Warrant.

            Company Indemnified Party: the meaning specified in Section 12.2.

            Determination Date: the meaning specified in Section 1.2(c).

            Exchange  Act: the meaning  specified in Section 12.1 or any similar
Federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time.

                                      -19-
<PAGE>

Reference to a particular  section of the Exchange Act shall include a reference
to a comparable section, if any, of any such similar Federal statute.

            Exercise  Form:  an  Exercise  Form in the form  annexed  hereto  as
Exhibit A.

            Exercise Price: the meaning specified on the cover of this Warrant.

            Expiration Date: the meaning specified on the cover of this Warrant.

            Fair Market Value: the meaning specified in Section 1.2(c).

            Holder(s): holder(s) of Registrable Securities.

            Indemnified Holder: the meaning specified in Section 12.1.

            Indemnified Party: the meaning specified in Section 12.2.

            Inspectors: the meaning specified in Section 9.11.

            Investment   Representation   Statement:    means   the   investment
representation statement attached hereto as Exhibit B.

            Nasdaq: the meaning specified in Section 1.2(c)(i).

            National Market: the meaning specified in Section 1.2(c)(i).

            Other  Securities:  any stock and other  securities  of the  Company
(other than Common  Stock) or of any other entity which shall become  subject to
issue or sale upon the  conversion or exchange of any stock or other  securities
of the Company.

            Registration  Expenses:  all  reasonable  expenses  incurred  by the
Company  in  complying  with  Sections  8.1 or 8.2  hereof,  including,  without
limitation, all registration,  qualification and filing fees, printing expenses,
escrow fees, fees and  disbursements  of counsel for the Company,  blue sky fees
and expenses,  the expense of any special audits  incident to or required by any
such  registration  (but excluding the compensation of regular  employees of the
Company which shall be paid in any event by the Company) and all reasonable fees
and  disbursements  of one  special  counsel for all of the Holders who elect to
include their Registrable Securities in any such registration up to a maximum of
$10,000 for such special counsel.

            Registration  Statement:  a registration  statement or  registration
statements  of  the  Company  filed  under  the   Securities  Act  covering  the
Registrable Securities.

            Registrable Securities:  (i) the Warrant Shares and other securities
issued or issuable upon exercise of the Warrants and (ii) any securities  issued
or issuable with respect to any Common Stock or other securities  referred to in
subdivision  (i) by way of stock dividend or stock split or in connection with a
combination or other reorganization or otherwise.

            Rule 144: the meaning specified in Section 14.

                                      -20-
<PAGE>

            SEC: the  Securities  and Exchange  Commission  or any other Federal
agency  at the  time  administering  the  Securities  Act or the  Exchange  Act,
whichever is the relevant statute for the particular purpose.

            Securities Act: the meaning  specified on the cover of this Warrant,
or any  similar  Federal  statute,  and the  rules  and  regulations  of the SEC
thereunder,  all as the same  shall be in  effect at the  time.  Reference  to a
particular  section  of the  Securities  Act shall  include a  reference  to the
comparable section, if any, of any such similar Federal statute.

            Selling  Expenses  shall mean all  underwriting  discounts,  selling
commissions and stock transfer taxes applicable to the securities  registered by
the Holders and all fees and  disbursements  of special  counsel for the Holders
(but only to the extent  such fees and  disbursements  of such  special  counsel
exceed $10,000).

            Transaction: the meaning specified in Section 7.1(c).

            Violation: the meaning specified in Section 12.1.

            Warrantholder: the meaning specified on the cover of this Warrant.

            Warrant Shares: the meaning specified on the cover of this Warrant.

         19. Miscellaneous.

            19.1 Entire Agreement. This Warrant constitutes the entire agreement
between the Company and the Warrantholder with respect to the Warrants.

            19.2 Binding  Effects;  Benefits.  This  Warrant  shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and assigns. Nothing in this
Warrant,  expressed  or implied,  is  intended to or shall  confer on any person
other than the Company and the  Warrantholder,  or their respective heirs, legal
representatives,  successors or assigns,  any rights,  remedies,  obligations or
liabilities under or by reason of this Warrant.

            19.3  Section and Other  Headings.  The  section and other  headings
contained  in this  Warrant  are for  reference  purposes  only and shall not be
deemed to be a part of this  Warrant or to affect the meaning or  interpretation
of this Warrant.

            19.4 Pronouns.  All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.

            19.5 Further  Assurances.  Each of the Company and the Warrantholder
shall do and  perform all such  further  acts and things and execute and deliver
all such other  certificates,  instruments  and  documents as the Company or the
Warrantholder  may,  at any time and from time to time,  reasonably  request  in
connection with the performance of any of the provisions of this Agreement.

                                      -21-
<PAGE>

            19.6  Notices.  All  notices  and other  communications  required or
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if delivered  personally  or sent by United States mail,
postage  prepaid,  to the parties  hereto at the following  addresses or to such
other address as any party hereto shall hereafter specify by notice to the other
party hereto:

                 (a) if to the Company, addressed to:

                     The 3DO Company
                     100 Cardinal Way
                     Redwood City, California 84063

                 (b) if to the Warrantholder, addressed to:

                     the address of such Warrantholder
                     appearing on the signature page to this Warrant.

         Except  as   otherwise   provided   herein,   all  such   notices   and
communications  shall be deemed to have been  received  on the date of  delivery
thereof, if delivered personally, or on the third Business Day after the mailing
thereof.

            19.7  Separability.  Any term or provision of this Warrant  which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,  be
ineffective  to the  extent  of  such  invalidity  or  unenforceability  without
rendering  invalid or unenforceable  the terms and provisions of this Warrant or
affecting  the validity or  enforceability  of any of the terms or provisions of
this Warrant in any other jurisdiction.

            19.8  Governing  Law.  This Warrant shall be deemed to be a contract
made under the laws of Delaware  and for all  purposes  shall be governed by and
construed  in  accordance  with  the  laws  of  such  State  applicable  to such
agreements made and to be performed entirely within such State.

            19.9 No Rights or Liabilities as Stockholder.  Nothing  contained in
this Warrant shall be determined as conferring upon the Warrantholder any rights
as a  stockholder  of  the  Company  or  as  imposing  any  liabilities  on  the
Warrantholder  to purchase any securities  whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.

                                      -22-

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                                        THE 3DO COMPANY

                                        By: /s/ James Alan Cook
                                            ------------------------------------
                                            Name:  James Alan Cook
                                            Title: Executive Vice President and
                                                   Secretary

                                        Gerard Klauer Mattison & Co., Inc.

                                        Name: /s/ Dominic Petito
                                              ----------------------------------
                                              Title: Senior Managing Director

                                        Address:
                                                   529 Fifth Avenue
                                        ----------------------------------------
                                                   New York, New York 10017
                                        ----------------------------------------

                                         Facsimile:      212-338-8991
                                                    ----------------------------

                                         Phone:          212-885-4100
                                                --------------------------------

                                         Attention:      Dominic Petito
                                                    ----------------------------

Dated: December 10, 2001

                                      -23-

<PAGE>

                                    EXHIBIT A

                               NOTICE OF EXERCISE

TO:      THE 3DO COMPANY

         1. The  undersigned  Warrantholder  hereby elects to purchase  ________
shares of Common Stock of The 3DO Company (the "Common  Stock")  pursuant to the
terms of the attached Warrant.

         2. Method of Exercise (Please initial the applicable blank):

            ___ The undersigned elects to exercise the attached Warrant by means
                of a cash payment,  and tenders herewith payment in full for the
                purchase price of the shares being purchased,  together with all
                applicable  transfer taxes,  if any. The undersigned  represents
                that the aforesaid shares of Common Stock are being acquired for
                the account of the  undersigned  for  investment  and not with a
                view to, or for  resale in  connection  with,  the  distribution
                thereof and that the  undersigned  has no present  intention  of
                distributing or reselling such shares.  In support thereof,  the
                undersigned has executed an Investment  Representation Statement
                attached hereto as Exhibit B.

            ___ The undersigned elects to exercise the attached Warrant by means
                of the net exercise provisions of Section 1.2 of the Warrant.

         3. Please issue a certificate or certificates  representing said shares
of Common Stock in the name of the undersigned Warrantholder:

                               ----------------------------------------

                               ----------------------------------------
                                       (Address)

                                           -------------------------------------
                                           Name of Warrantholder

                                           -------------------------------------
                                           Signature of Authorized Signatory

                                           -------------------------------------
                                           Print Name and Title

                                           -------------------------------------
                                           Date

<PAGE>

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

                                               _______ Shares of Common Stock of
                                                                 The 3DO Company

         In  connection  with the  acquisition  of the  above-listed  securities
pursuant to the exercise of the Warrant,  dated as of December 10, 2001,  issued
by The 3DO Company (the  "Company")  to the  undersigned  (the  "Warrant"),  the
undersigned  hereby  represents  to the  Company as follows:  (Unless  otherwise
defined, capitalized terms referred to herein have the meanings set forth in the
Warrant.)

         1. Investment Representations.

            (A) The  undersigned  understands  that the Warrant  Shares have not
been  registered  under the  Securities  Act, and will be issued  pursuant to an
exemption from  registration  contained in the Securities Act based in part upon
the representations of the undersigned  contained herein, and can be transferred
in the absence of registration only pursuant to an exemption from  registration,
Rule 144 or if the Company receives an opinion of counsel that such registration
is not required.

            (B) The  undersigned  is acquiring the Warrant Shares solely for its
own  account and not as a nominee for any other party and not with a view toward
the  resale  or  distribution  thereof  in  violation  of the  securities  laws;
provided,  however,  that by making the representations  herein, the undersigned
does not  agree to hold  any of the  Warrant  Shares  for any  minimum  or other
specific  term and  reserves  the right to dispose of the Warrant  Shares at any
time in accordance with or pursuant to a registration  statement or an exemption
under the Securities Act.

            (C) The  undersigned is experienced in evaluating  companies such as
the Company,  is able to fend for the undersigned's self in transactions such as
the one  contemplated  by the Warrant,  has such  knowledge  and  experience  in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of the undersigned's prospective investment in the Company, and
has the  ability  to bear the  economic  risks of the  investment,  including  a
complete  loss  of such  undersigned's  investment.  The  undersigned  has  been
afforded  an  opportunity  to ask  such  questions  of the  Company's  officers,
employees,  agents,  accountants  and  representatives  concerning the Company's
business,  operations,   financial  condition,  assets,  liabilities  and  other
relevant  matters as it has  deemed  necessary  or  desirable.  The  undersigned
believes  that it has received  all the  information  it considers  necessary or
appropriate to decide whether to purchase the Warrant Shares.

            (D)  Warrantholder  is an  "accredited  investor" as defined in Rule
501(a) under the Securities Act.

            (E)  Warrantholder  is not purchasing the Warrant Shares as a result
of or subsequent to any advertisement,  article,  notice or other  communication
regarding the Warrant  Shares  published in any  newspaper,  magazine or similar
media or broadcast  over  television or radio or presented at any seminar or any
other general solicitation or general advertisement.

<PAGE>

                                    --------------------------------------------
                                    Name of Warrantholder

                                    --------------------------------------------
                                    Signature of Authorized Signatory

                                    --------------------------------------------
                                    Print Name and Title

                                    --------------------------------------------
                                    Date

<PAGE>

                                    EXHIBIT C

                                 ASSIGNMENT FORM

               (To be executed only upon transfer of this Warrant)

         For value  received,  the undersigned  registered  holder of the within
Warrant  hereby sells,  assigns and transfers  unto  ______________________  the
right represented by such Warrant to purchase  __________ shares of Common Stock
of The 3DO Company to which such  Warrant  relates  and all other  rights of the
Warrantholder  under the within  Warrant  (including,  without  limitation,  the
registration  rights provided in Section 8 of the within Warrant),  and appoints
______________________  Attorney  to make such  transfer on the books of The 3DO
Company  maintained  for such purpose,  with full power of  substitution  in the
premises.

Dated: ___________________

                                       Signature
                                                 -------------------------------

                                                 -------------------------------
                                                          (Print Name)

                                                 -------------------------------
                                                        (Street Address)

                                                 -------------------------------
                                                 (City)     (State)   (Zip Code)

Signed in the presence of:

-------------------------------CONFIDENTIAL

                                                                   EXHIBIT 10.32

Confidential  information  omitted where indicated by "[*]" and filed separately
with the Securities  Exchange  Commission pursuant to a request for confidential
treatment under Rule 406 of the Securities Act of 1933.

                    SONY COMPUTER ENTERTAINMENT AMERICA INC.

                                       AND

                                 THE 3DO COMPANY

                                 PLAYSTATION(R)2

                                 CD-ROM/DVD-ROM

                          LICENSED PUBLISHER AGREEMENT

<PAGE>

                                                                    CONFIDENTIAL

                                TABLE OF CONTENTS

SECTION:                                                                   PAGE:
--------                                                                   -----

    1.  DEFINITION OF TERMS                                                   1

    2.  LICENSE GRANT                                                         3

    3.  DEVELOPMENT OF LICENSED PRODUCTS                                      3

    4.  LIMITATIONS ON LICENSES; RESERVATION OF RIGHTS                        4

    5.  QUALITY STANDARDS FOR THE LICENSED PRODUCTS                           5

    6.  MANUFACTURE OF THE LICENSED PRODUCTS                                  7

    7.  MARKETING AND DISTRIBUTION                                           10

    8.  ROYALTIES                                                            12

    9.  REPRESENTATIONS AND WARRANTIES                                       15

    10. INDEMNITIES; LIMITED LIABILITY                                       16

    11. SCEA INTELLECTUAL PROPERTY RIGHTS                                    17

    12. INFRINGEMENT OF SCEA INTELLECTUAL PROPERTY RIGHTS BY THIRD PARTIES   18

    13. CONFIDENTIALITY                                                      18

    14. TERM AND TERMINATION                                                 20

    15. EFFECT OF EXPIRATION OR TERMINATION                                  22

    16. MISCELLANEOUS PROVISIONS                                             23

<PAGE>

                                                                    CONFIDENTIAL

                                PLAYSTATION(R) 2
                                 CD-ROM/DVD-ROM
                          LICENSED PUBLISHER AGREEMENT

This LICENSED PUBLISHER AGREEMENT (the "Agreement" or "LPA"), entered into as of
the 1st day of April, 2000 (the "Effective  Date"), by and between SONY COMPUTER
ENTERTAINMENT  AMERICA INC., with offices at 919 E. Hillsdale Boulevard,  Foster
City, CA 94404 (hereinafter  "SCEA"),  and The 3DO Company,  with offices at 600
Galveston Drive, Redwood City, CA 94063 (hereinafter Publisher").

WHEREAS,  SCEA, its parent company,  Sony Computer  Entertainment  Inc.,  and/or
certain of their affiliates and companies within the group of companies of which
any of  them  form a part  (collectively  referred  to  herein  as  "Sony")  are
designing  and  developing,   and  licensing  core  components  of,  a  computer
entertainment system known as the PlayStation(R)2  computer entertainment system
(hereinafter referred to as the "System").

WHEREAS,  SCEA has the right to grant  licenses  to  certain  SCEA  Intellectual
Property Rights (as defined below) in connection with the System.

WHEREAS,  Publisher  desires to be granted a  non-exclusive  license to publish,
develop,  have manufactured,  market,  distribute and sell Licensed Products (as
defined below) pursuant to the terms and conditions set forth in this Agreement;
and  SCEA is  willing,  on the  terms  and  subject  to the  conditions  of this
Agreement, to grant Publisher such a license.

NOW,  THEREFORE,  in  consideration  of  the  representations,   warranties  and
covenants  contained  herein,  and other good and  valuable  consideration,  the
receipt and  sufficiency  of which is hereby  acknowledged,  Publisher  and SCEA
hereby agree as follows:

1.    Definition of Terms.

         1.1  "Advertising   Materials"   means  any   advertising,   marketing,
merchandising,  promotional,  public  relations  (including  press releases) and
display  materials  relating  to or  concerning  Licensed  Products  or proposed
Licensed Products, or any other advertising, merchandising,  promotional, public
relations  (including press releases) and display materials depicting any of the
Licensed  Trademarks.  For  purposes of this  Agreement,  Advertising  Materials
include  any  advertisements  in which the System is  referred to or used in any
way,  including  but not limited to giving the System away as prizes in contests
or  sweepstakes  and the  public  display  of the  System in  product  placement
opportunities.

      1.2  "Affiliate  of SCEA"  means,  as  applicable,  either  Sony  Computer
Entertainment  Inc. in Japan,  Sony  Computer  Entertainment  Europe Ltd. in the
United  Kingdom  or such  other  Sony  Computer  Entertainment  entity as may be
established from time to time.

      1.3 "Designated  Manufacturing Facility" means a manufacturing facility or
facilities  which is  designated by SCEA in its sole  discretion to  manufacture
Licensed Products and/or their component parts, which may include  manufacturing
facilities owned and operated by affiliated companies of SCEA.

      1.4 "Development System Agreement" means an agreement entered into between
SCEA and a Licensed Publisher, Licensed Developer or other licensee for the sale
or license of Development Tools.

      1.5 "Development  Tools" means the PlayStation 2 development tools sold or
licensed by SCEA to a Licensed  Publisher or Licensed  Developer  for use in the
development of Executable Software for the System.

      1.6 "Executable  Software" means software which includes  Product Software
and any software provided directly or indirectly by SCEA or an Affiliate of SCEA
designed for  execution  exclusively  on the System and which has the ability to
communicate with the software resident in the System.

      1.7 "Fiscal Year" means a year measured from April 1 to March 31.

      1.8 "Generic Line" means the generic legal  attribution  line used on SCEA
marketing or other materials,  which shall be or be substantially similar to the
following:  "Product copyright and trademarks are the property of the respective
publisher or their licensors".

      1.9 "Guidelines" shall mean any guidelines of SCEA or an Affiliate of SCEA
with respect to SCEA Intellectual Property Rights, which may be set forth in the
SourceBook 2 or in other documentation  provided by SCEA or an Affiliate of SCEA
to Publisher.

      1.10 "Legal Copy" means any legal or contractual  information  required to
be used in connection with a Licensed Product or Product Information,  including
but not limited to copyright and trademark attributions, contractual credits and
developer or distribution credits.

      1.11  "Level 1 Rebate"  shall have the  meaning  set forth in Section  8.4
hereto.

      1.12  "Level 2 Rebate"  shall have the  meaning  set forth in Section  8.4
hereto.

                                       1
<PAGE>

                                                                    CONFIDENTIAL

      1.13 "Licensed  Developer" means any developer that has signed a valid and
then current Licensed Developer Agreement.

      1.14  "Licensed  Developer  Agreement"  or "LDA" means a valid and current
license agreement for the development of Licensed Products for the System, fully
executed between a Licensed Developer and SCEA or an Affiliate of SCEA.

      1.15  "Licensed  Products"  means the  Executable  Software  (which may be
combined  with  Executable  Software of other  Licensed  Publishers  or Licensed
Developers),  which shall consist of one product developed for the System or for
the  original  PlayStation  game  console  per  Unit,  in final  form  developed
exclusively  for the System.  Publisher shall have no right to package or bundle
more than one product  developed for the System or for the original  PlayStation
game console in a single Unit unless separately agreed with SCEA.

      1.16 "Licensed  Publisher" means any publisher that has signed a valid and
then current Licensed Publisher Agreement.

      1.17  "Licensed  Publisher  Agreement"  or "LPA" means a valid and current
license  agreement for the  publication,  development,  manufacture,  marketing,
distribution  and sale of  Licensed  Products  for the  System,  fully  executed
between a Licensed Publisher and SCEA or an Affiliate of SCEA.

      1.18  "Licensed   Territory"  means  the  United  States   (including  its
possessions and territories) and Canada.  The Licensed Territory may be modified
and/or supplemented by SCEA from time to time pursuant to Section 4.4 below.

      1.19 "Licensed  Trademarks"  means the  trademarks,  service marks,  trade
dress,  logos and other icons or indicia  designated by SCEA in the SourceBook 2
or other Guidelines for use on or in connection with Licensed Products.  Nothing
contained in this  Agreement  shall in any way grant  Publisher the right to use
the trademark "Sony" in any manner. SCEA may amend such Licensed Trademarks from
time to time in the  SourceBook 2 or other  Guidelines or upon written notice to
Publisher.

      1.20 "Manufacturing  Specifications"  means  specifications  setting forth
terms  relating to the  manufacture  and assembly of PlayStation 2 Format Discs,
Packaging,  Printed Materials and each of their component parts,  which shall be
set  forth in the  SourceBook  2 or other  documentation  provided  by SCEA or a
Designated  Manufacturing  Facility to  Publisher  and which may be amended from
time to time upon reasonable notice to Publisher.

      1.21 "Master  Disc" means a recordable  CD-ROM or DVD-ROM disc in the form
requested by SCEA  containing  final  pre-production  Executable  Software for a
Licensed Product.

      1.22 "Packaging" means, with respect to each Licensed Product, the carton,
containers, packaging, edge labels and other proprietary labels, trade dress and
wrapping  materials,  including  any  jewel  case (or other  CD-ROM  or  DVD-ROM
container) or parts thereof,  but excluding  Printed Materials and PlayStation 2
Format Discs.

      1.23  "PlayStation  2 Format  Discs" means the uniquely  marked or colored
CD-ROM or DVD-ROM discs formatted for use with the System which, for purposes of
this Agreement,  are  manufactured  on behalf of Publisher and contain  Licensed
Products or SCEA Demo Discs.

      1.24 "Printed  Materials"  means all artwork and  mechanicals set forth on
the disc label of the PlayStation Disc relating to any of the Licensed  Products
and on or inside any Packaging for the Licensed  Product,  and all instructional
manuals,  liners, inserts, trade dress and other user information to be inserted
into the Packaging.

      1.25  "Product  Information"  means any  information  owned or licensed by
Publisher relating in any way to Licensed Products, including but not limited to
demos, videos, hints and tips, artwork, depictions of Licensed Product cover art
and videotaped interviews.

      1.26 "Product  Proposal" shall have the meaning set forth in Section 5.2.1
hereto.

      1.27  "Product  Software"  means any  software  including  audio and video
material developed by a Licensed Publisher or Licensed Developer,  which, either
by itself or combined with Product Software of other licensees,  when integrated
with  software  provided by SCEA or an  Affiliate  of SCEA,  creates  Executable
Software.  It is  understood  that  Product  Software  contains  no  proprietary
information of Sony or any other rights of SCEA.

      1.28 "Publisher  Intellectual  Property  Rights" means those  intellectual
property  rights,  including but not limited to patents and other patent rights,
copyrights,  trademarks,  service  marks,  trade names,  trade dress,  mask work
rights,  utility  model  rights,  trade secret  rights,  technical  information,
know-how,   and  the  equivalents  of  the  foregoing  under  the  laws  of  any
jurisdiction,   and  all  other  proprietary  or  intellectual  property  rights
throughout the universe, which pertain to Product Software, Product Information,
Printed Materials,  Advertising  Materials or other rights of Publisher required
or necessary under this Agreement.

      1.29  "Purchase  Order"  means  a  written  purchase  order  processed  in
accordance   with  the  terms  of  Section  6.2.2  hereto,   the   Manufacturing
Specifications or other

                                       2
<PAGE>

                                                                    CONFIDENTIAL

terms  provided  separately  by SCEA or a Designated  Manufacturing  Facility to
Publisher.

      1.30  "SCEA  Demo  Disc"  means  any  demonstration   disc  developed  and
distributed by SCEA.

      1.31  "SCEA  Established  Third  Party Demo Disc  Programs"  means (i) any
consumer or trade  demonstration disc program specified in the SourceBook 2, and
(ii) any other third party demo disc  program  established  by SCEA for Licensed
Publishers.

      1.32 "SCEA Intellectual Property Rights" means those intellectual property
rights,   including  but  not  limited  to  patents  and  other  patent  rights,
copyrights,  trademarks,  service  marks,  trade names,  trade dress,  mask work
rights,  utility  model  rights,  trade secret  rights,  technical  information,
know-how,   and  the  equivalents  of  the  foregoing  under  the  laws  of  any
jurisdiction,   and  all  other  proprietary  or  intellectual  property  rights
throughout  the universe,  which are required to ensure  compatibility  with the
System or which pertain to the Licensed Trademarks.

      1.33 "SCEA Product Code" means the product  identification number assigned
to each Licensed Product, which shall consist of separate product identification
numbers for  multiple  disc sets (i.e.,  SLUS-xxxxx).  This SCEA Product Code is
used on the Packaging and PlayStation Disc relating to each Licensed Product, as
well  as on  most  communications  between  SCEA  and  Publisher  as a  mode  of
identifying the Licensed Product other than by title.

      1.34 "Sony Materials" means any data, object code, source code,  firmware,
documentation  (or any part(s) of any of the foregoing),  related to the System,
selected in the sole judgment of SCEA, which are provided or supplied by SCEA or
an  Affiliate  of SCEA to  Publisher  or any  Licensed  Developer  and/or  other
Licensed  Publisher.  For purposes of this  Agreement,  Sony Materials shall not
include any hardware portions of the Development Tools, but shall include

      1.35  "SourceBook  2" means the  PlayStation  2  SourceBook  (or any other
reference  guide  containing   information  similar  to  the  SourceBook  2  but
designated with a different name) prepared by SCEA, which is provided separately
to  Publisher.  The  SourceBook  2 is  designed  to serve as the first  point of
reference by Publisher in every phase of the development,  approval, manufacture
and marketing of Licensed Products.

      1.36 "Standard  Rebate" shall mean the rebate offered by SCEA on titles of
Licensed  Products that achieve  specified sales volumes as set forth in Section
8.4 of this Agreement.

      1.37 "Third Party Demo Disc" means any demo disc developed and marketed by
a Licensed Publisher, which complies with the terms of an SCEA Established Third
Party Demo Disc Program.

      1.38  "Unit"  means  an  individual  copy  of  a  Licensed  Product  title
regardless  of the  number  of  PlayStation  2 Format  Discs  constituting  such
Licensed Product title.

      1.39  "Wholesale  Price" or "WSP"  shall mean the greater of (i) the first
published  price of the  Licensed  Product  offered to retailers by Publisher as
evidenced by a sell sheet or price list issued by Publisher,  or (ii) the actual
price paid by retailers upon the first commercial shipment of a Licensed Product
without offsets, rebates or deductions from invoices of any kind.

2.   License.

      2.1 License Grant. SCEA grants to Publisher, and Publisher hereby accepts,
for the term of this  Agreement,  within  the  Licensed  Territory,  under  SCEA
Intellectual   Property  Rights  owned,   controlled  or  licensed  by  SCEA,  a
non-exclusive, non-transferable license, without the right to sublicense (except
as  specifically  provided  herein),  to publish  Licensed  Products  using Sony
Materials, which right shall be limited to the following rights and other rights
set forth in, and in  accordance  with the terms of, this LPA: (i) to produce or
develop Licensed Products and to enter into agreements with Licensed  Developers
and other third parties to develop Licensed Products; (ii) to have such Licensed
Products  manufactured;  (iii) to  market,  distribute  and sell  such  Licensed
Products and to authorize  others to do so; (iv) to use the Licensed  Trademarks
strictly and only in connection with the development,  manufacturing, marketing,
packaging,  advertising and promotion of the Licensed  Products,  and subject to
SCEA's right of approval as provided herein;  and (v) to sublicense to end users
the right to use the Licensed Products for noncommercial purposes in conjunction
with the System only, and not with other devices or for public performance.

      2.2 Separate PlayStation Agreements. Unless specifically set forth in this
Agreement,  all terms used herein are specific to the System and the third party
licensing  program  related  thereto and not to the  original  PlayStation  game
console or third party licensing  program related thereto.  Licenses relating to
the original  PlayStation  game console are subject to separate  agreements with
SCEA,  and any license of rights to  Publisher  under such  separate  agreements
shall not confer on Publisher any rights under the System and vice versa.

3.   Development of Licensed Products.

      3.1 Right to  Develop.  This LPA  grants  Publisher  the right to  develop
Licensed Products.  It also gives Publisher the right to purchase and/or license
Development  Tools,  as is  appropriate,  from  SCEA  or its  designated  agent,
pursuant to a separate Development System Agreement with SCEA, to assist in such
development. In developing Executable Software (or portions thereof),

                                       3
<PAGE>

                                                                    CONFIDENTIAL

Publisher  and its agents shall fully  comply in all  respects  with any and all
technical  specifications  which may from time to time be issued by SCEA. In the
event that  Publisher  uses third  party tools to develop  Executable  Software,
Publisher  shall be  responsible  for ensuring that it has obtained  appropriate
licenses for such use.

      3.2  Development by Third  Parties.  Except as otherwise set forth herein,
Publisher shall not provide Sony Materials or SCEA's Confidential Information to
any third party.  Publisher  shall be  responsible  for  determining  that third
parties meet the criteria set forth herein.  Publisher may contract with a third
party for development of Licensed  Products,  provided that such third party is:
(i) a Licensed Publisher, (ii) a Licensed Developer, or (iii) an SCEA-authorized
subcontractor in compliance with the provisions of Section 16.6. Publisher shall
notify SCEA in writing of the  identity of any such third  party  within  thirty
(30) days of entering  into an  agreement  or other  arrangement  with the third
party.

4.   Limitations on Licenses; Reservation of Rights.

      4.1 Reverse Engineering  Prohibited.  Other than as expressly permitted by
SCEA in  writing,  Publisher  shall  not  directly  or  indirectly  disassemble,
decrypt,  electronically  scan, peel  semiconductor  components,  decompile,  or
otherwise  reverse  engineer  in any manner or attempt  to reverse  engineer  or
derive source code from,  all or any portion of the Sony  Materials,  or permit,
assist or encourage any third party to do so. Other than as expressly  permitted
by SCEA in writing,  Publisher  shall not use,  modify,  reproduce,  sublicense,
distribute, create derivative works from, or otherwise provide to third parties,
the Sony Materials,  in whole or in part,  other than as expressly  permitted by
SCEA. SCEA shall permit Publisher to study the performance, design and operation
of the  Development  Tools  solely for the limited  purposes of  developing  and
testing Publisher's software applications, or to build tools to assist Publisher
with the development and testing of software applications for Licensed Products.
Any tools  developed  or derived by  Publisher  resulting  from the study of the
performance, design or operation of the Development Tools shall be considered as
derivative  products of the Sony  Materials for copyright  purposes,  but may be
treated as trade secrets of Publisher.  In no event shall  Publisher  patent any
tools created,  developed or derived from Sony  Materials.  Publisher  shall not
make available to any third party any tools  developed or derived from the study
of the Development Tools without the express written  permission of SCEA. Use of
such tools  shall be  strictly  limited to the  creation  or testing of Licensed
Products  and any  other  use,  direct or  indirect  of such  tools is  strictly
prohibited.  Publisher  shall  be  required  in all  cases to pay  royalties  in
accordance  with  Section  8  hereto  to  SCEA  on any of  Publisher's  products
utilizing  any Sony  Materials or  derivative  works made  therefrom.  Moreover,
Publisher  shall bear all risks  arising  from  incompatibility  of its Licensed
Product and the System resulting from use of Publisher-created tools. The burden
of proof under this Section shall be on  Publisher,  and SCEA reserves the right
to require Publisher to furnish evidence satisfactory to SCEA that Publisher has
complied with this Section.

      4.2 Reservation of SCEA's Rights.

         4.2.1 Limitation of Rights to Licenses Granted. The licenses granted in
this  Agreement  extend  only  to  the  publication,  development,  manufacture,
marketing,  distribution and sale of Licensed Products for use on the System, in
such formats as may be designated by SCEA.  Without  limiting the  generality of
the  foregoing  and except as otherwise  provided  herein,  Publisher  shall not
distribute  or transmit the  Executable  Software or the  Licensed  Products via
electronic  means or any other means now known or hereafter  devised,  including
without  limitation,  via wireless,  cable, fiber optic means,  telephone lines,
microwave  and/or radio waves,  or over a network of computers or other devices.
Notwithstanding   this  limitation,   Publisher  may   electronically   transmit
Executable  Software  from  site to site,  or from  machine  to  machine  over a
computer  network,  for the sole purpose of facilitating  development;  provided
that no right of  retransmission  shall  attach  to any such  transmission,  and
provided further that Publisher shall use reasonable security measures customary
within  the  high  technology  industry  to  reduce  the  risk  of  unauthorized
interception or  retransmission of such  transmissions.  This Agreement does not
grant  any right or  license,  under any SCEA  Intellectual  Property  Rights or
otherwise, except as expressly provided herein, and no other right or license is
to be implied by or inferred from any provision of this Agreement or the conduct
of the parties hereunder.

         4.2.2  Other  Use of Sony  Materials  and  SCEA  Intellectual  Property
Rights.  Publisher  shall  not  make  use  of any  Sony  Materials  or any  SCEA
Intellectual  Property  Rights (or any portion  thereof) except as authorized by
and in compliance with the provisions of this Agreement. Publisher shall not use
the Executable  Software,  Sony Materials or SCEA's Confidential  Information in
connection  with the  development  of any  software  for any  emulator  or other
computer  hardware or software system.  No right,  license or privilege has been
granted to Publisher  hereunder  concerning  the  development  of any collateral
product or other use or purpose of any kind whatsoever which displays or depicts
any of the Licensed  Trademarks.  The rights set forth in Section  2.1(v) hereto
are  limited  to  the  right  to  sublicense   such  rights  to  end  users  for
non-commercial  use; any public performance  relating to the Licensed Product or
the System is prohibited unless expressly authorized in writing by SCEA.

      4.3  Reservation  of  Publisher's  Rights.  Separate  and apart  from Sony
Materials and other rights licensed to Publisher by SCEA  hereunder,  as between
Publisher and SCEA,  Publisher retains all rights,  title and interest in and to
the Product Software,  and the Product Proposals and Product Information related
thereto,  including without limitation  Publisher  Intellectual  Property Rights
therein,

                                       4
<PAGE>

                                                                    CONFIDENTIAL

as well as Publisher's  rights in any source code and other underlying  material
such as  artwork  and music  related  thereto  and any names  used as titles for
Licensed  Products  and other  trademarks  used by  Publisher.  Nothing  in this
Agreement  shall be  construed  to restrict  the right of  Publisher to develop,
distribute  or transmit  products  incorporating  the Product  Software and such
underlying  material  (separate  and  apart  from  the Sony  Materials)  for any
hardware  platform or service other than the System, or to use Printed Materials
or Advertising Materials approved by SCEA as provided herein (provided that such
Printed  Materials  and/or  Advertising  Materials  do not contain any  Licensed
Trademarks) as Publisher determines for such other platforms.  SCEA shall not do
or cause to be done any act or thing in any way  impairing  or tending to impair
or  dilute  any  of   Publisher's   rights,   title  or   interests   hereunder.
Notwithstanding  the  foregoing,  Publisher  shall not  distribute  or  transmit
Product  Software  which is intended  to be used with the System via  electronic
means or any other  means  now known or  hereafter  devised,  including  without
limitation,  via wireless,  cable, fiber optic means, telephone lines, microwave
and/or radio waves, or other a network of computers or other devices,  except as
otherwise permitted in Section 4.2.1 hereto.

      4.4 Additions to and Deletions  from  Licensed  Territory.  SCEA may, from
time to time, add one or more  countries to the Licensed  Territory by providing
written notice of such addition to Publisher.  SCEA shall also have the right to
delete,  and intends to delete any countries from the Licensed  Territory if, in
SCEA's  reasonable  judgment,  the  laws or  enforcement  of  such  laws in such
countries  do not protect  SCEA  Intellectual  Property  Rights.  In the event a
country is deleted from the Licensed Territory,  SCEA shall deliver to Publisher
a  notice  stating  the  number  of days  within  which  Publisher  shall  cease
distributing  Licensed Products,  and retrieve any Development Tools located, in
any such deleted country.  Publisher shall cease distributing Licensed Products,
and retrieve any Development Tools, directly or through  subcontractors,  by the
end of the period stated in such notice.

      4.5 SourceBook 2 Requirement.  Publisher  shall be required to comply with
all the  provisions  of the  SourceBook  2,  including  without  limitation  the
Technical   Requirements   Checklist  therein,  when  published,   or  within  a
commercially  reasonable  time following its  publication  to  incorporate  such
provisions, as if such provisions were set forth in this Agreement.

5.   Quality Standards for the Licensed Products.

      5.1 Quality Assurance  Generally.  The Licensed Products (and all portions
thereof)  and  Publisher's  use of any Licensed  Trademarks  shall be subject to
SCEA's  prior  written  approval,  which shall not be  unreasonably  withheld or
delayed  and which  shall be within  SCEA's  sole  discretion  as to  acceptable
standards of quality.  SCEA shall have the right at any stage of the development
of a Licensed  Product to review such  Licensed  Product to ensure that it meets
SCEA's quality assurance  standards.  All Licensed Products will be developed to
substantially  utilize the particular  capabilities of the System's  proprietary
hardware,  software and graphics. No approval by SCEA of any element or stage of
development  of any  Licensed  Product  shall be deemed an approval of any other
element or stage of such Licensed Product, nor shall any such approval be deemed
to  constitute  a waiver  of any of  SCEA's  rights  under  this  Agreement.  In
addition,  SCEA's  approval  of any element or any stage of  development  of any
Licensed Product shall not release Publisher from any of its representations and
warranties in Section 9.2 hereunder.

     5.2 Product Proposals.

         5.2.1  Submission of Product  Proposal.  Publisher shall submit to SCEA
for SCEA's  written  approval or  disapproval,  which shall not be  unreasonably
withheld or delayed, a written proposal (the "Product  Proposal").  Such Product
Proposal must contain all information  specified in the SourceBook 2, as well as
any  additional  information  that SCEA may deem to be useful in evaluating  the
proposed Licensed Product.

         5.2.2 Approval of Product Proposal.  After SCEA's review of Publisher's
Product Proposal,  Publisher will receive written notice from SCEA of the status
of the Product Proposal, which may range from "Approved" to "Not Approved." Such
conditions shall have the meanings ascribed to them in the SourceBook 2, and may
be changed from time to time by SCEA. If a Product  Proposal is "Not  Approved",
then neither  Publisher nor any other Licensed  Developer or Licensed  Publisher
may re-submit such Product Proposal without significant,  substantive revisions.
SCEA shall have no  obligation  to approve any  Product  Proposal  submitted  by
Publisher. Any development conducted by or at the direction of Publisher and any
legal  commitment  relating  to  development  work shall be at  Publisher's  own
financial  and  commercial  risk.  Publisher  shall not  construe  approval of a
Product  Proposal  as a  commitment  by SCEA to  grant  final  approval  to such
Licensed   Product.   Nothing  herein  shall  restrict  SCEA  from  commercially
exploiting any coincidentally  similar concept(s) and/or product(s),  which have
been independently developed by SCEA, an Affiliate of SCEA or any third party.

         5.2.3 Changes to Product Proposal. Publisher shall notify SCEA promptly
in writing in the event of any  material  proposed  change in any portion of the
Product  Proposal.  SCEA's  approval of a Product  Proposal  shall not  obligate
Publisher to continue with  development  or production of the proposed  Licensed
Product,  provided that Publisher must immediately  notify SCEA in writing if it
discontinues,  cancels or otherwise delays past the original  scheduled delivery
date the  development  of any  proposed  Licensed  Product.  In the  event  that
Publisher  licenses a proposed Licensed Product from another Licensed  Publisher
or a Licensed  Developer,  it shall  immediately

                                       5
<PAGE>

                                                                    CONFIDENTIAL

notify SCEA of such change and must re-submit such Licensed  Product to SCEA for
approval in accordance with the provisions of Section 5.2.1 above.

      5.3 Work-in-Progress.

         5.3.1  Submission  and Review of  Work-in-Progress.  SCEA shall require
Publisher  to submit to SCEA  work-in-progress  on Licensed  Products at certain
intervals throughout their development and, upon written notice to Publisher, at
any time during the development process.  Upon approval of the Product Proposal,
Publisher  must,  within  the  time  frame  indicated  in the  approval  letter,
communicate  with SCEA and mutually  agree on a framework for the review of such
Licensed Product throughout the development process ("Review Process"). Once the
Review  Process  has  begun,  Publisher  shall  be  responsible  for  submitting
work-in-progress  to SCEA in  accordance  with such Review  Process.  Failure to
submit  work-in-progress in accordance with any stage of the Review Process may,
at SCEA's discretion, result in revocation of approval of such Product Proposal.

         5.3.2  Approval  of Work in  Progress.  SCEA  shall  have the  right to
approve,  reject or require additional information with respect to each stage of
the Review  Process.  SCEA shall  specify in writing  the  reasons  for any such
rejection or request for additional information and shall state what corrections
and/or  improvements  are  necessary.  If any stage of the Review Process is not
provided  to SCEA or is not  successfully  met after a  reasonable  cure  period
agreed to between  SCEA and  Publisher,  SCEA shall have the right to revoke the
approval of Publisher's Product Proposal.

         5.3.3 Cancellation or Delay; Conditions of Approval.  Licensed Products
which are  canceled by  Publisher  or are late in meeting  the final  Executable
Software delivery date by more than three (3) months (without agreeing with SCEA
on a  modified  final  delivery  date)  shall  be  subject  to  the  termination
provisions  set forth in  Section  14.3  hereto.  In  addition,  failure to make
changes  required  by SCEA to the  Licensed  Product  at any stage of the Review
Process,  or making  material  changes to the Licensed  Product  without  SCEA's
approval,  may subject  Publisher  to the  termination  provisions  set forth in
Section 14.3 hereto.

      5.4 Approval of Executable  Software.  On or before the date  specified in
the Product  Proposal or as determined  by SCEA pursuant to the Review  Process,
Publisher  shall  deliver to SCEA for its  inspection  and  evaluation,  a final
version of the Executable Software for the proposed Licensed Product.  SCEA will
evaluate  such  Executable  Software  and  notify  Publisher  in  writing of its
approval or disapproval, which shall not be unreasonably withheld or delayed. If
such  Executable  Software  is  disapproved,  SCEA shall  specify in writing the
reasons for such  disapproval and state what  corrections and  improvements  are
necessary.  After making the necessary  corrections and improvements,  Publisher
shall submit a new version of such Executable Software for SCEA's approval. SCEA
shall have the right to  disapprove  Executable  Software  if it fails to comply
with SCEA's  corrections or  improvements or one or more conditions as set forth
in the  SourceBook 2 with no obligation to review all elements of any version of
Executable  Software.  All  final  versions  of  Executable  Software  shall  be
submitted  in the format  prescribed  by SCEA and shall  include  such number of
Master  Discs as SCEA  may  require  from  time to time.  Publisher  hereby  (i)
warrants that all final versions of Executable  Software are fully tested;  (ii)
shall use its best efforts to ensure such Executable  Software is fully debugged
prior to submission to SCEA;  and (iii) warrants that all versions of Executable
Software  comply or will comply with  standards set forth in the SourceBook 2 or
other  documentation  provided  by SCEA to  Publisher.  In  addition,  prior  to
manufacture of Executable  Software,  Publisher must sign an accountability form
stating that (x) Publisher approves the release of such Executable  Software for
manufacture in its current form and (y) Publisher shall be fully responsible for
any problems related to such Executable Software.

      5.5 Printed Materials.

         5.5.1 Compliance with Guidelines.  For each proposed  Licensed Product,
Publisher  shall be  responsible,  at  Publisher's  expense,  for  creating  and
developing  Printed  Materials.  All  Printed  Materials  shall  comply with the
Guidelines,  which may be amended  from time to time,  provided  that  Publisher
shall,  except as  otherwise  provided  herein,  only be required  to  implement
amended  Guidelines in subsequent  orders of Printed  Materials and shall not be
required to recall or destroy previously manufactured Printed Materials,  unless
such  Printed  Materials  do not comply with the  original  requirements  in the
Guidelines or unless explicitly required to do so in writing by SCEA.

         5.5.2  Submission  and  Approval  of Printed  Materials.  No later than
submission  of  final  Executable  Software  for a  proposed  Licensed  Product,
Publisher  shall also deliver to SCEA, for review and  evaluation,  the proposed
final Printed Materials and a form of limited warranty for the proposed Licensed
Product.  Failure to meet any scheduled  release dates for a Licensed Product is
solely  the  risk  and   responsibility  of  Publisher,   and  SCEA  assumes  no
responsibility for Publisher failing to meet such scheduled release dates due to
this submission  process.  The quality of such Printed Materials shall be of the
same quality as that associated with other  commercially  available high quality
software products.  If any of the Printed Materials are disapproved,  SCEA shall
specify  the  reasons  for such  disapproval  and  state  what  corrections  are
necessary.  SCEA shall have no  liability  to  Publisher  for costs  incurred or
irrevocably  committed to by Publisher for production of Printed  Materials that
are  disapproved  by  SCEA.  After  making  the  necessary  corrections  to  any
disapproved  Printed Materials,  Publisher must submit new Printed Materials for
approval by SCEA. SCEA shall not

                                       6
<PAGE>

                                                                    CONFIDENTIAL

unreasonably withhold or delay its review of Printed Materials.

      5.6 Advertising Materials.

         5.6.1 Submission and Approval of Advertising Materials.  Pre-production
samples of all Advertising Materials shall be submitted by Publisher to SCEA, at
Publisher's expense, prior to any actual production,  use or distribution of any
such items by Publisher or on its behalf.  SCEA shall  evaluate and approve such
Advertising  Materials,  which  approval shall not be  unreasonably  withheld or
delayed, as to the following standards:  (i) the content,  quality, and style of
the overall advertisement;  (ii) the quality, style, appearance and usage of any
of the  Licensed  Trademarks;  (iii)  appropriate  references  of  any  required
notices;  and (iv)  compliance  with the  Guidelines.  If any of the Advertising
Materials are  disapproved,  SCEA shall specify the reasons for such disapproval
and  state  what  corrections  are  necessary.  SCEA may  require  Publisher  to
immediately  withdraw  and  reprint  any  Advertising  Materials  that have been
published but have not received the written approval of SCEA. SCEA shall have no
liability  to  Publisher  for costs  incurred  or  irrevocably  committed  to by
Publisher for production of Advertising  Materials that are disapproved by SCEA.
For each  Licensed  Product,  Publisher  shall be required to deliver to SCEA an
accountability  form stating that all  Advertising  Materials  for such Licensed
Product  comply  or will  comply  with the  Guidelines  for use of the  Licensed
Trademarks.   After  making  the  necessary   corrections  to  any   disapproved
Advertising Materials,  Publisher must submit new proposed Advertising Materials
for approval by SCEA.

         5.6.2 Failure to Comply; Three Strikes Program.  Publishers who fail to
obtain  SCEA's   approval  of  Advertising   Materials  prior  to  broadcast  or
publication  shall be subject to the provisions of the "Three  Strikes"  program
outlined in the  SourceBook 2. Failure to obtain SCEA's  approval of Advertising
Materials  could result in termination of this LPA or termination of approval of
the Licensed  Product,  or could subject  Publisher to the provisions of Section
14.4  hereto.  Failure  to meet any  scheduled  release  dates  for  Advertising
Materials is solely the risk and  responsibility of Publisher,  and SCEA assumes
no responsibility for Publisher failing to meet such scheduled release dates due
to approval requirements as set forth in this Section.

         5.6.3 SCEA  Materials.  Subject in each  instance to the prior  written
approval  of  SCEA,  Publisher  may  use  advertising  materials  owned  by SCEA
pertaining  to the  System or to the  Licensed  Trademarks  on such  Advertising
Materials  as may,  in  Publisher's  judgment,  promote  the  sale  of  Licensed
Products.

      5.7 Rating  Requirements.  If required by SCEA or any governmental entity,
Publisher  shall submit each  Licensed  Product to a consumer  advisory  ratings
system  designated  by SCEA and/or such  governmental  entity for the purpose of
obtaining  rating  code(s)  for each  Licensed  Product.  Any and all  costs and
expenses  incurred in connection  with  obtaining  such rating  code(s) shall be
borne  solely by  Publisher.  Any  required  consumer  advisory  rating  code(s)
procured hereby shall be displayed on the Licensed Product and in the associated
Printed Materials and Advertising Materials, at Publisher's cost and expense, in
accordance  with the  SourceBook  2 or other  documentation  provided by SCEA to
Publisher.

      5.8 Publisher's Additional Quality Assurance  Obligations.  If at any time
or  times  subsequent  to  the  approval  of  Executable  Software  and  Printed
Materials,  SCEA  identifies  any  material  defects  (such  materiality  to  be
determined by SCEA in its sole discretion) with respect to the Licensed Product,
or in the event that SCEA identifies any improper use of its Licensed Trademarks
or Sony  Materials  with respect to the Licensed  Product,  or any such material
defects or improper use are brought to the attention of SCEA,  Publisher  shall,
at no cost to SCEA,  promptly correct any such material defects, or improper use
of Licensed  Trademarks or Sony  Materials,  to SCEA's  commercially  reasonable
satisfaction, which may include, if necessary in SCEA's judgment, the recall and
re-release of such Licensed Product. In the event any Units of Licensed Products
create  any risk of loss or damage  to any  property  or  injury to any  person,
Publisher shall  immediately take effective steps, at Publisher's sole liability
and expense,  to recall and/or to remove such defective  Units from any affected
channels of distribution,  provided, however, that if Publisher is not acting as
the  distributor  and/or  seller  for  the  Licensed  Products,  its  obligation
hereunder  shall be to use its best efforts to arrange  removal of such Licensed
Product from  channels of  distribution.  Publisher  shall  provide all end-user
support for the Licensed Products and SCEA expressly disclaims any obligation to
provide end-user support on Publisher's Licensed Products.

6.    Manufacture of the Licensed Products.

      6.1  Manufacture  of Units.  Upon  approval  of  Executable  Software  and
associated  Printed  Materials  pursuant  to Section 5, and  subject to Sections
6.1.2,  6.1.3 and 6.1.4 below,  the Designated  Manufacturing  Facility will, in
accordance  with the terms and  conditions  set forth in this  Section 6, and at
Publisher's  expense (a)  manufacture  PlayStation 2 Format Discs for Publisher;
(b)  manufacture  Publisher's  Packaging  and/or Printed  Materials;  and/or (c)
assemble  the  PlayStation  2 Format  Discs with the Printed  Materials  and the
Packaging.  Publisher shall comply with all Manufacturing Specifications related
to the particular  terms set forth herein.  SCEA reserves the right to insert or
require the Publisher to insert certain Printed Materials relating to the System
or Licensed Trademarks into each Unit.

         6.1.1 Manufacture of PlayStation 2 Format Discs.

                                       7
<PAGE>

                                                                    CONFIDENTIAL

            6.1.1.1 Designated Manufacturing Facilities. To insure compatibility
of the  PlayStation  2 Format Discs with the System,  consistent  quality of the
Licensed Product and incorporation of anti-piracy  security systems,  SCEA shall
designate  and  license  a  Designated   Manufacturing   Facility  to  reproduce
PlayStation 2 Format Discs. Publisher shall purchase [*] of its requirements for
PlayStation 2 Format Discs from such  Designated  Manufacturing  Facility during
the term of the  Agreement.  Any  Designated  Manufacturing  Facility shall be a
third party beneficiary of this Agreement.

            6.1.1.2  Creation of Master  CD-ROM or DVD-ROM.  Pursuant to Section
5.4 in connection  with final testing of Executable  Software,  Publisher  shall
provide SCEA with the number of Master Discs  specified in the  SourceBook  2. A
Designated  Manufacturing  Facility  shall create from one of the fully approved
Master Discs provided by Publisher the original  master CD-ROM or DVD-ROM,  from
which all other copies of the Licensed  Product are to be replicated.  Publisher
shall  be   responsible   for  the  costs,   as  determined  by  the  Designated
Manufacturing  Facility,  of producing such original master.  In order to insure
against  loss or damage to the copies of the  Executable  Software  furnished to
SCEA, Publisher will retain duplicates of all Master Discs, and neither SCEA nor
any Designated  Manufacturing  Facility shall be liable for loss of or damage to
any Master Discs or Executable Software.

         6.1.2 Manufacture of Printed Materials.

         6.1.2.1 Manufacture by Designated  Manufacturing Facility. If Publisher
elects to obtain  Printed  Materials from a Designated  Manufacturing  Facility,
Publisher shall deliver all  SCEA-approved  Printed Materials to that Designated
Manufacturing Facility, at Publisher's sole risk and expense, and the Designated
Manufacturing  Facility will  manufacture  such Printed  Materials in accordance
with this Section 6. In order to insure  against loss or damage to the copies of
the Printed Materials furnished to SCEA, Publisher will retain duplicates of all
Printed Materials,  and neither SCEA nor any Designated  Manufacturing  Facility
shall be liable for loss of or damage to any such Printed Materials.

         6.1.2.2 Manufacture by Alternate Source.  Subject to SCEA's approval as
provided in Section 5.5.2 hereto and in this Section,  Publisher may elect to be
responsible for  manufacturing its own Printed Materials (other than any Artwork
which may be placed  directly upon the  PlayStation  Disc,  which Publisher will
supply to the Designated  Manufacturing Facility for placement),  at Publisher's
sole risk and expense.  Prior to  production of each order,  Publisher  shall be
required to supply SCEA with  samples of any Printed  Materials  not produced or
supplied  by a  Designated  Manufacturing  Facility,  at no  charge  to  SCEA or
Designated  Manufacturing  Facility,  for SCEA's  approval  with  respect to the
quality thereof.  SCEA shall have the right to disapprove any Printed  Materials
that  do  not  comply  with  the  Manufacturing  Specifications.   Manufacturing
Specifications  for  Printed  Materials  shall be  comparable  to  manufacturing
specifications  applied by SCEA to its own software  products for the System. If
Publisher  elects to supply  its own  Printed  Materials,  neither  SCEA nor any
Designated  Manufacturing  Facility shall be responsible  for any delays arising
from use of Publisher's own Printed Materials.

         6.1.3 Manufacture of Packaging.

            6.1.3.1 Manufacture by Designated  Manufacturing Facility. To ensure
consistent  quality of the Licensed  Products,  SCEA may designate and license a
Designated  Manufacturing  Facility to reproduce  proprietary  Packaging for the
System.  If SCEA creates  proprietary  Packaging for the System,  then Publisher
shall purchase all of its  requirements  for such  proprietary  Packaging from a
Designated  Manufacturing  Facility  during the term of the  Agreement,  and the
Designated  Manufacturing Facility will manufacture such Packaging in accordance
with this Section 6.

            6.1.3.2  Manufacture  by  Alternate  Source.  If SCEA  elects to use
standard,  non-proprietary Packaging for the System, then Publisher may elect to
be responsible for  manufacturing  its own Packaging (other than any proprietary
labels and any  portion of a container  containing  Licensed  Trademarks,  which
Publisher  must purchase from a Designated  Manufacturing  Facility).  Publisher
shall  assume  all   responsibility  for  the  creation  of  such  Packaging  at
Publisher's  sole risk and expense.  Publisher shall be responsible for encoding
and printing  proprietary  edge labels  provided by a  Designated  Manufacturing
Facility  with  information  reasonably  specified by SCEA from time to time and
will  apply  such  labels to each Unit of the  Licensed  Product  as  reasonably
specified  by SCEA.  Prior  to  production  of each  order,  Publisher  shall be
required to supply SCEA with samples of any  Packaging  not produced or supplied
by a  Designated  Manufacturing  Facility,  at no charge  to SCEA or  Designated
Manufacturing Facility, for SCEA's approval with respect to the quality thereof.
SCEA shall have the right to disapprove  any Packaging that does not comply with
the Manufacturing  Specifications.  Manufacturing  Specifications  for Packaging
shall be comparable to manufacturing  specifications  applied by SCEA to its own
software  products  for the System.  If  Publisher  procures  Packaging  from an
alternate source,  then it must also procure assembly services from an alternate
source.  If Publisher  elects to supply its own Packaging,  neither SCEA nor any
Designated  Manufacturing  Facility shall be responsible  for any delays arising
from use of Publisher's own Packaging.

            6.1.4  Assembly  Services.  Publisher  may either  procure  assembly
services from a Designated  Manufacturing  Facility or from an alternate source.
If Publisher elects to be responsible for assembling the Licensed Products, then
the  Designated  Manufacturing  Facility  shall ship the component  parts of the
Licensed

-----------
* Confidential portions omitted and filed separately with the Commission.

                                       8
<PAGE>

                                                                    CONFIDENTIAL

Product to a destination  provided by Publisher,  at  Publisher's  sole risk and
expense.  SCEA shall have the right to inspect any assembly  facilities utilized
by  Publisher  in order to  determine  if the  component  parts of the  Licensed
Products are being assembled in accordance with SCEA's quality  standards.  SCEA
may require  that  Publisher  recall any Licensed  Products  that do not contain
proprietary  labels or other material  component parts or that otherwise fail to
comply  with  the  Manufacturing  Specifications.  If  Publisher  elects  to use
alternate  assembly  facilities,  neither SCEA nor any Designated  Manufacturing
Facility shall be responsible for any delays or missing  component parts arising
from use of alternate assembly facilities.

      6.2 Price, Payment and Terms.

         6.2.1  Price.  The  applicable  price for  manufacture  of any Units of
Licensed  Products  ordered  hereunder  shall be  provided to  Publisher  by the
Designated  Manufacturing  Facility.  Purchase shall be subject to the terms and
conditions  set out in any  purchase  order form  supplied to  Publisher  by the
Designated Manufacturing Facility.

         6.2.2  Orders.  Publisher  shall  issue to a  Designated  Manufacturing
Facility a written  Purchase  Order(s) in the form set forth and  containing the
information required in the Manufacturing  Specifications,  with a copy to SCEA.
All orders shall be subject to approval by SCEA, which shall not be unreasonably
withheld  or  delayed.  Purchase  Orders  issued by  Publisher  to a  Designated
Manufacturing  Facility  for each  Licensed  Product  approved  by SCEA shall be
non-cancelable  and be  subject  to the  order  requirements  of the  Designated
Manufacturing Facility.

         6.2.3  Payment  Terms.  Purchase  Orders  will be  invoiced  as soon as
reasonably   practical  after  receipt,  and  such  invoice  will  include  both
manufacturing  price and royalties payable pursuant to Section 8.1 or 8.2 hereto
for each Unit of Licensed Products ordered.  Each invoice will be payable either
on a cash-in-advance basis or pursuant to a letter of credit, or, at SCEA's sole
discretion,  on credit  terms.  Terms for  cash-in-advance  and letter of credit
payments shall be as set forth in the SourceBook 2. All amounts  hereunder shall
be payable in United States dollars. All associated banking charges with respect
to  payments  of  manufacturing  costs and  royalties  shall be borne  solely by
Publisher.

         6.2.3.1  Credit Terms.  SCEA may at its sole  discretion  extend credit
terms and limits to Publisher. SCEA may also revoke such credit terms and limits
at its sole  discretion.  If Publisher  qualifies for credit terms,  then orders
will be invoiced  upon  shipment of Licensed  Products  and each invoice will be
payable  within  thirty (30) days of the date of the  invoice.  Any overdue sums
shall bear interest at the rate of one and one-half (1- 1/2%) percent per month,
or such lower rate as may be the maximum rate permitted  under  applicable  law,
from the date when payment first became due to and including the date of payment
thereof.  Publisher shall be  additionally  liable for all costs and expenses of
collection,  including  without  limitation,  reasonable  fees for attorneys and
court costs.

         6.2.3.2 General Terms. No deduction may be made from remittances unless
an approved credit memo has been issued by a Designated  Manufacturing Facility.
Neither SCEA nor a Designated  Manufacturing  Facility shall be responsible  for
shortage  or  breakage  with  respect  to any order if  component  parts  and/or
assembly  services  are  obtained  from  alternate  sources.  Each  shipment  to
Publisher  shall  constitute a separate sale,  whether said shipment be whole or
partial  fulfillment of any order.  Nothing in this Agreement shall excuse or be
construed as a waiver of  Publisher's  obligation to timely  provide any and all
payments owed to SCEA and Designated Manufacturing Facility.

      6.3  Delivery  of  Licensed  Products.  Neither  SCEA  nor any  Designated
Manufacturing  Facility  shall have an  obligation to store  completed  Units of
Licensed  Products.  Publisher  may either  specify a mode of  delivery or allow
Designated Manufacturing Facility to select a mode of delivery.

      6.4  Ownership  of  Master  Discs.  Due to the  proprietary  nature of the
mastering process,  neither SCEA nor a Designated  Manufacturing  Facility shall
under any  circumstances  release any original  master  CD-ROM,  Master Discs or
other in-process materials to Publisher.  All such materials shall be and remain
the sole property of SCEA or Designated Manufacturing Facility.  Notwithstanding
the  foregoing,  Publisher  Intellectual  Property  Rights  contained in Product
Software that is contained in such in-process  materials is, as between SCEA and
Publisher,  the sole and exclusive property of Publisher or its licensors (other
than SCEA and/or its affiliates).

7.    Marketing and Distribution.

      7.1  Marketing  Generally.  In  accordance  with  the  provisions  of this
Agreement  and at no  expense to SCEA,  Publisher  shall,  and shall  direct its
distributors to, diligently  market,  sell and distribute the Licensed Products,
and shall use  commercially  reasonable  efforts  to  stimulate  demand for such
Licensed Products in the Licensed  Territory and to supply any resulting demand.
Publisher shall use its reasonable best efforts to protect the Licensed Products
from and  against  illegal  reproduction  and/or  copying by end users or by any
other persons or entities.

      7.2 Samples.  Publisher shall provide to SCEA, at no additional  cost, for
SCEA's internal use, [*] sample copies of each Licensed Product. Publisher shall
pay  any  manufacturing  costs  to  the  Designated  Manufacturing  Facility  in
accordance  with Section 6.2,  but shall not be obligated to pay  royalties,  in
connection  with such sample

-----------
* Confidential portions omitted and filed separately with the Commission.

                                       9
<PAGE>

                                                                    CONFIDENTIAL

Units.  In the event that  Publisher  assembles  any Licensed  Product  using an
alternate source,  Publisher shall be responsible for shipping such sample Units
to SCEA at Publisher's  cost and expense.  SCEA shall not directly or indirectly
resell any such sample copies of the Licensed Products without Publisher's prior
written consent. SCEA may give sample copies to its employees,  provided that it
uses its  reasonable  efforts to ensure  that such  copies are not sold into the
retail market.  In addition,  subject to  availability,  Publisher shall sell to
SCEA additional  quantities of Licensed Products at the Wholesale Price for such
Licensed  Product.  Any changes to SCEA's policy regarding sample Units shall be
set forth in the SourceBook 2.

      7.3  Marketing  Programs  of  SCEA.  From  time to time,  SCEA may  invite
Publisher to participate in  promotional or advertising  opportunities  that may
feature one or more  Licensed  Products  from one or more  Licensed  Publishers.
Participation  shall be voluntary  and subject to terms to be  determined at the
time of the  opportunity.  In the event  Publisher  elects to  participate,  all
materials  submitted by Publisher to SCEA shall be submitted  subject to Section
10.2  hereunder  and  delivery  of  such  materials  to  SCEA  shall  constitute
acceptance  by Publisher of the terms of the offer.  Moreover,  SCEA may use the
Generic Line on all multi-product  marketing materials,  unless otherwise agreed
in writing.

      7.4  Demonstration  Disc  Programs.  SCEA may, from time to time,  provide
opportunities  for  Publisher  to  participate  in SCEA Demo Disc  programs.  In
addition,  SCEA may,  from time to time,  grant to Publisher the right to create
Third  Party Demo  Discs  pursuant  to SCEA  Established  Third  Party Demo Disc
Programs.   The   specifications   with  respect  to  the  approval,   creation,
manufacture,  marketing,  distribution  and sale of any such demo disc  programs
shall be set forth in the SourceBook 2 or in other  documentation to be provided
by SCEA to Publisher.  Except as otherwise specifically set forth herein, in the
SourceBook  2 or in  other  documentation,  Third  Party  Demo  Discs  shall  be
considered "Licensed Products" and shall be subject in all respects to the terms
and conditions of this Agreement  pertaining to Licensed Products.  In addition,
the  following  procedures  shall also apply to SCEA Demo Discs and Third  Party
Demo Discs:

         7.4.1 SCEA Demo Discs.

            7.4.1.1  License.  SCEA may, but shall not be obligated  to,  invite
Licensed Publishers to participate in any SCEA Demo Disc program.  Participation
by Publisher in an SCEA Demo Disc program shall be optional. If Publisher elects
to participate in an SCEA Demo Disc program and provides Product  Information to
SCEA in connection thereto, Publisher shall thereby grant to SCEA a royalty-free
license  during  the  term  of  this  Agreement  in the  Licensed  Territory  to
manufacture,  use, sell,  distribute,  market,  advertise and otherwise  promote
Publisher's  Product  Information  as part of such SCEA Demo  Disc  program.  In
addition, Publisher shall grant SCEA the right to feature Publisher and Licensed
Product  names in SCEA  Demo Disc  Advertising  Materials  and to use  copies of
screen  displays  generated by the code,  representative  video samples or other
Product Information in such SCEA Demo Disc Advertising Materials.  All decisions
relating to the selection of first and third party Product  Information  and all
other aspects of SCEA Demo Discs shall be in the sole discretion of SCEA.

            7.4.1.2 Submission and Approval of Product Information. Upon receipt
of  written  notice  that  SCEA  has  tentatively  chosen  Publisher's   Product
Information for inclusion in an SCEA Demo Disc,  Publisher shall deliver to SCEA
such  requested  Product  Information by no later than the deadline set forth in
such notice. Separate notice will be sent for each SCEA Demo Disc, and Publisher
must sign each notice prior to inclusion in such SCEA Demo Disc. Publisher shall
include  its own Legal  Copy on the title  screen or  elsewhere  in the  Product
Information  submitted to SCEA.  SCEA shall only provide the Generic Line on the
SCEA Demo Disc title screen and packaging. Publisher's Product Information shall
comply with SCEA's technical specifications provided to Publisher. SCEA reserves
the  right to review  and test the  Product  Information  provided  and  request
revisions prior to inclusion on the SCEA Demo Disc. If SCEA requests  changes to
the Product  Information and Publisher elects to continue to participate in such
Demo Disc,  Publisher  shall make such changes as soon as possible after receipt
of written  notice of such  requested  changes from SCEA, but not later than the
deadline  for receipt of Product  Information.  Failure to make such changes and
provide the modified Product Information to SCEA by the deadline shall result in
the Product  Information being removed from the SCEA Demo Disc. Costs associated
with preparation of Product  Information  supplied to SCEA shall be borne solely
by Publisher.  Except as otherwise provided in this Section, SCEA shall not edit
or modify Product Information  provided to SCEA by Publisher without Publisher's
consent,  not to be  unreasonably  withheld.  SCEA  shall  have the right to use
subcontractors  to assist in the development of any SCEA Demo Disc. With respect
to Product Information provided by Publisher in demo form, the demo delivered to
SCEA shall not  constitute  the  complete  Licensed  Product  and shall be, at a
minimum,  an amount  sufficient  to  demonstrate  the  Licensed  Product's  core
features  and  value,  without  providing  too  much  information  so as to give
consumers a disincentive to purchase the complete Licensed Product.

            7.4.1.3 No Obligation to Publish.  Acceptance of Product Information
for test and review shall not be deemed confirmation that SCEA shall include the
Product  Information on an SCEA Demo Disc,  nor shall it constitute  approval of
any other  element of the Licensed  Product.  SCEA  reserves the right to choose
from products submitted from other Licensed  Publishers and first party products
to  determine  the products to be included in SCEA Demo Discs,  and  Publisher's
Licensed Products will not be guaranteed prominence or preferential treatment on
any

                                       10
<PAGE>

                                                                    CONFIDENTIAL

SCEA Demo Disc.  Nothing  herein shall be construed as creating an obligation of
SCEA to publish  Product  Information  submitted  by  Publisher in any SCEA Demo
Disc, nor shall SCEA be obligated to publish, advertise or promote any SCEA Demo
Disc.

            7.4.1.4  SCEA Demo  Discs  Sold at  Retail.  Publisher  is aware and
acknowledges that certain SCEA Demo Discs may be distributed and sold by SCEA in
the retail  market.  If Publisher  elects to  participate  in any SCEA Demo Disc
program  which is sold in the retail  market,  as notified by SCEA to Publisher,
Publisher acknowledges prior to participation in any such SCEA Demo Disc that it
is  aware of no  limitations  regarding  Product  Information  provided  to SCEA
pursuant to the terms of this Agreement  which would in any way restrict  SCEA's
ability to distribute or sell such SCEA Demo Disc at retail,  nor does Publisher
or its licensors  (other than SCEA and/or its affiliates)  have any anticipation
of receiving any  compensation  from such retail  sales.  In the event that SCEA
institutes  a SCEA  Demo  Disc in  which a fee  and/or  royalty  is  charged  to
Publisher,  SCEA and Publisher  will enter into a separate  agreement  regarding
such SCEA Demo Disc.

         7.4.2 Third Party Demo Discs.

            7.4.2.1  License.  Publisher may participate in any SCEA Established
Third Party Demo Disc Program.  Publisher  shall notify SCEA of its intention to
participate  in any such  program,  and upon receipt of such notice,  SCEA shall
grant to Publisher the right and license to use Licensed Products in Third Party
Demo Discs and to use, distribute, market, advertise and otherwise promote (and,
if permitted in accordance  with the terms of any SCEA  Established  Third Party
Program or otherwise  permitted by SCEA, to sell) such Third Party Demo Discs in
accordance with the SourceBook 2, which may be modified from time to time at the
sole discretion of SCEA.  Unless  separately  agreed in writing with SCEA, Third
Party Demo Discs shall not be used,  distributed,  promoted,  bundled or sold in
conjunction with other products. In addition, SCEA hereby consents to the use of
the Licensed  Trademarks in connection  with Third Party Demo Discs,  subject to
the approval  procedures set forth in this  Agreement.  If any SCEA  Established
Third Party Demo Disc  Program is specified  by SCEA to be for  promotional  use
only  and not for  resale,  and  such  Third  Party  Demo  Disc is  subsequently
discovered to be for sale,  Publisher's  right to produce Third Party Demo Discs
shall  thereupon  be  automatically  revoked,  and SCEA  shall have the right to
terminate  any related  Third Party Demo Discs in  accordance  with the terms of
Section 14.3 or 14.4 hereto.

            7.4.2.2 Submission and Approval of Third Party Demo Discs. Publisher
shall deliver to SCEA, for SCEA's prior approval,  a final version of each Third
Party Demo Disc in a format prescribed by SCEA. Such Third Party Demo Disc shall
comply with all  requirements  provided to Publisher by SCEA in the SourceBook 2
or  otherwise.  In  addition,  SCEA shall  evaluate the Third Party Demo Disc in
accordance  with the approval  provisions  for  Executable  Software and Printed
Materials  set  forth  in  Sections  5.4  and  5.5,  respectively.  Furthermore,
Publisher  shall obtain the approval of SCEA in connection  with any Advertising
Materials relating to the Third Party Demo Discs in accordance with the approval
provisions  set forth in Section  5.6.  Costs  associated  with Third Party Demo
Discs shall be borne solely by Publisher.  No approval by SCEA of any element of
any Third  Party  Demo Disc  shall be deemed an  approval  of any other  element
thereto,  nor does any such approval  constitute  final approval for the related
Licensed Product.  Unless otherwise  permitted by SCEA,  Publisher shall clearly
and  conspicuously  state on all Third  Party Demo Disc  Packaging  and  Printed
Materials  that the Third Party Demo Disc is for  promotional  purposes only and
not for resale.

            7.4.2.3 Manufacture and Royalty of Third Party Demo Discs. Publisher
shall  comply  with  all  Manufacturing   Specifications  with  respect  to  the
manufacture and payment for  manufacturing  costs of Third Party Demo Discs, and
Publisher  shall also comply with all terms and  conditions of Section 6 hereto.
No  costs  incurred  in the  development,  manufacture,  licensing,  production,
marketing  and/or  distribution  (and if permitted  by SCEA,  sale) of the Third
Party Demo Disc shall be deducted  from any amounts  payable to SCEA  hereunder.
Royalties on Third Party Demo Discs shall be as provided in Section 8.2.

      7.5 Contests and Sweepstakes of Publisher.  SCEA  acknowledges  that, from
time to time, Publisher may conduct contests and sweepstakes to promote Licensed
Products.  SCEA  shall  permit  Publisher  to  include  contest  or  sweepstakes
materials in Printed Materials and Advertising Materials,  subject to compliance
with the approval  provisions of Section 5.5 and 5.6 hereunder,  compliance with
the provisions of Section 9.2 and 10.2  hereunder,  and subject to the following
additional terms and conditions:

      (i)  Publisher   represents  that  it  has  retained  the  services  of  a
fulfillment  house to administer  the contest or  sweepstakes  and if it has not
retained the services of a fulfillment house,  Publisher represents and warrants
that it has the  expertise to conduct such contests or  sweepstakes,  and in any
event,  Publisher  shall  assume  full  responsibility  for all  aspects of such
contest or sweepstakes;

      (ii)  Publisher  warrants that each contest,  sweepstakes,  and promotion,
comply with local, state and federal laws or regulations;

      (iii)  Publisher  represents and warrants that it has obtained the consent
of all  holders of  intellectual  property  rights  required  to be  obtained in
connection with each contest or sweepstakes  including,  but not limited to, the
consent of any holder of copyrights or  trademarks  relating to any  Advertising
Materials publicizing the contest or

                                       11
<PAGE>

                                                                    CONFIDENTIAL

sweepstakes,  or  the  prizes  being  awarded  to  winners  of  the  contest  or
sweepstakes; and

      (iv) Publisher  shall make  available to SCEA all contest and  sweepstakes
material prior to publication in accordance with the approval  process set forth
in Section 5.5 or 5.6.

Approval  by SCEA of contest or  sweepstakes  materials  for use in the  Printed
Materials  or  Advertising  Materials  (or any  use of the  System  or  Licensed
Products  as prizes in such  contest or  sweepstakes)  shall not  constitute  an
endorsement by SCEA of such contest or sweepstakes, nor shall such acceptance be
construed as SCEA having  reviewed and approved such  materials  for  compliance
with any federal or state law,  statute,  regulations,  order or the like, which
shall be Publisher's sole responsibility.

      7.6  PlayStation  Website.  All Licensed  Publishers  shall be required to
provide Product Information for a web page for each of its Licensed Products for
display on the PlayStation  promotional website, or other website or websites as
may be operated by SCEA from time to time in  connection  with the  promotion of
the PlayStation brand. Specifications for Product Information for such web pages
shall be as provided in the SourceBook 2. Publisher shall provide SCEA with such
Product  Information  for each  Licensed  Product  upon  submission  of  Printed
Materials  to SCEA  for  approval  in  accordance  with  Section  5.5.2  hereto.
Publisher  shall also  provide  updates  to such web page in a timely  manner as
required by SCEA in updates to the SourceBook 2.

      7.7 Distribution.

         7.7.1  Distribution  Channels.  Publisher  may  use  such  distribution
channels  as  Publisher  deems  appropriate,  including  the use of third  party
distributors,  resellers,  dealers and sales representatives.  In the event that
Publisher  elects to have one of its Licensed  Products  distributed and sold by
another  Licensed  Publisher,  Publisher must provide SCEA with advance  written
notice of such election,  the name of the Licensed  Publisher and any additional
information  requested by SCEA regarding the nature of the distribution services
provided  by such  Licensed  Publisher  prior to  manufacture  of such  Licensed
Product.

         7.7.2 Limitations on Distribution. Notwithstanding any other provisions
in this Agreement,  Publisher shall not, directly or indirectly,  solicit orders
from or sell any Units of the Licensed  Products to any person or entity outside
of the  Licensed  Territory.  In  addition,  Publisher  shall  not  directly  or
indirectly  solicit orders for or sell any Units of the Licensed Products in any
situation  where  Publisher  knows or reasonably  should know that such Licensed
Products may be exported or resold outside of the Licensed Territory.

8.    Royalties.

      8.1 Applicable Royalties on Licensed Products.

         8.1.1 Initial  Orders.  Publisher  shall pay SCEA,  either  directly or
through its designee, a per title royalty in United States dollars for each Unit
of the Licensed  Products  manufactured  based on the initial Wholesale Price of
the Licensed Product, as follows:

------------------------------------------------------
               Wholesale Price   Per Title Royalty
------------------------------------------------------
[Band 1]            $[*] to $[*]      $[*]
[Band 2]            $[*] to $[*]      $[*]
[Band 3]            $[*] to $[*]      $[*]
[Band 4]            $[*] to $[*]      $[*]
[Band 5]            $[*] +            [*] % of WSP + $[*]
------------------------------------------------------
In the absence of  satisfactory  evidence to support the WSP,  the royalty  rate
that shall apply will be [*] per Unit.

        8.1.2 Reorders  and Other  Programs.  Royalties on additional  orders to
manufacture a specific  Licensed Product shall be the royalty  determined by the
initial  Wholesale  Price as reported by  Publisher  for that  Licensed  Product
regardless  of the  wholesale  price  of the  Licensed  Product  at the  time of
reorder,  except  in the  event  that the  Wholesale  Price  increases  for such
Licensed Product, in which case the royalty shall be adjusted upwards to reflect
the higher Wholesale Price.  Licensed  Products  qualifying for SCEA's "Greatest
Hits"  programs  or other  programs  offered  by SCEA  shall be  subject  to the
royalties  applicable for such programs.  Publisher  acknowledges that as of the
date of execution of this  Agreement no "Greatest  Hits" program  exists for the
PlayStation 2 Third Party licensing program.

      8.2 Third Party Demo Disc Program  Royalties:  Publisher  shall pay SCEA a
per Unit royalty in United States  dollars of [*] for each Third Party Demo Disc
Unit manufactured.  The quantity of Units ordered shall comply with the terms of
such SCEA Established Third Party Demo Disc Program.

      8.3 Payment. Payment of royalties under Sections 8.1 and 8.2 shall be made
to SCEA  through  its  Designated  Manufacturing  Facility  concurrent  with the
placement  of  an  order  to  manufacture   Licensed   Product  and  payment  of
manufacturing  costs in accordance  with the terms and  conditions  set forth in
Sections  6.2.3,  unless  otherwise  agreed in writing with SCEA. At the time of
placing an order to manufacture a Licensed  Product,  Publisher  shall submit to
SCEA an  accurate  accounting  statement  setting  out the  number  of  units of
Licensed  Product  to  be  manufactured,   projected  initial  wholesale  price,
applicable  royalty,  and total amount due SCEA.  In addition,  Publisher  shall
submit to SCEA prior to placing the initial  order for each  Licensed  Product a
separate certification,

-------------------
*    Confidential portion omitted and filed separately with the Commission.

                                       12
<PAGE>

                                                                    CONFIDENTIAL

in the  form  provided  by SCEA in the  SourceBook  2,  signed  by  officers  of
Publisher that  certifies that the Wholesale  Price provided to SCEA is accurate
and  attaching  such  documentation  supporting  the WSP as  requested  by SCEA.
Payment  shall be made  prior to  manufacture  unless  SCEA has agreed to extend
credit terms to Publisher in writing pursuant to Section 6.2.3.3. Nothing herein
shall be construed as requiring  SCEA to extend credit terms to  Publisher.  The
accounting  statement due hereunder shall be subject to the audit and accounting
provisions  set  forth  in  paragraph  16.2  below.  No  costs  incurred  in the
development,  manufacture,  marketing,  sale and/or distribution of the Licensed
Products  shall  be  deducted  from any  royalties  payable  to SCEA  hereunder.
Similarly, there shall be no deduction from the royalties otherwise owed to SCEA
hereunder as a result of any  uncollectible  accounts owed to Publisher,  or for
any credits,  discounts,  allowances  or returns  which  Publisher may credit or
otherwise  grant to any  third  party  customer  of any  Units  of the  Licensed
Products, or for any taxes, fees,  assessments or expenses of any kind which may
be incurred by  Publisher in  connection  with its sale or  distribution  of any
Units of the  Licensed  Products  or  arising  with  respect  to the  payment of
royalties  hereunder.  In  addition  to the  royalty  payments  provided to SCEA
hereunder,  Publisher shall be solely responsible for and bear any cost relating
to any withholding  taxes or other such assessments  which may be imposed by any
governmental  authority  with respect to the royalties  paid to SCEA  hereunder;
provided,  however, that SCEA shall not manufacture Licensed Products outside of
the United  States  without  the prior  consent of  Publisher.  Publisher  shall
provide  SCEA with  official  tax  receipts or other such  documentary  evidence
issued by the applicable tax  authorities  sufficient to  substantiate  that any
such taxes or assessments have in fact been paid.

      8.4 Rebate Programs.  Publisher shall be eligible to participate in one of
three rebate programs offered by SCEA: the Standard Rebate program,  the Level 1
Rebate program,  or the Level 2 Rebate program.  If Publisher qualifies for such
rebates as set forth herein, rebates shall be credited to Publisher's account as
provided below:

---------------------------------------------------------
Units Ordered      Standard     Level 1       Level 2
---------------------------------------------------------
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
[*] - [*]          [*]          [*]           [*]
---------------------------------------------------------

         8.4.1 Standard Rebate Program.  All Publishers qualify for the Standard
Rebate program.  Rebates will be offered on an individual  title basis.  Rebates
will be given to any individual  Licensed Product that exceeds the above numbers
of Units during the first year after first commercial  shipment of such Licensed
Product.  The rebate in effect at the end of such year for the Licensed  Product
will remain in effect for as long as Publisher  continues to sell such  Licensed
Product,  but  Publisher  will  not  receive  further  rebates  if sales of such
Licensed  Product hit additional  thresholds as specified above after such year.
The Standard Rebate may not be used in conjunction  with a Third Party Demo Disc
program or any promotional  program of SCEA, with Licensed Products that qualify
for any "Greatest  Hits" program of SCEA or with Licensed  Products that qualify
for the [*]. Royalty.

         8.4.2 Level 1 Rebate  Program:  To be  eligible  for the Level 1 Rebate
program,  Publisher must ship over [*] Units of certain  Licensed  Products in a
single  Fiscal  Year.  Level 1 Rebates  shall be  credited  to  Publisher  on an
individual title basis. Other terms of the Level 1 Rebate are as follows:

      (i) Only Publisher's  titles (as determined below) that meet the following
conditions  shall count toward the [*] Unit  threshold:  Publisher must order at
least [*] Units of the Licensed Product both within the first year of commercial
release of such Licensed Product and during the qualifying Fiscal Year.

      (ii) Any Licensed Products,  including "Greatest Hits" titles and products
for the original  PlayStation game console,  but excluding all demo discs, shall
count toward the [*] Unit threshold (provided they meet the conditions set forth
in  Section  8.4.2(i)  above).  For  purposes  of  determining  Level  1  Rebate
thresholds  and the  conditions  set  forth in  Section  8.4.2(i),  full  priced
Licensed  Products and "Greatest  Hits"  Licensed  Products  shall be considered
separate Licensed Products, with separate Unit minimums and release dates.

      (iii) Level 1 Rebates shall apply only to Licensed Products (not including
"Greatest  Hits" titles,  Licensed  Products  qualifying for the [*] royalty and
products for the original  PlayStation  game console) ordered in the Fiscal Year
following  the  Fiscal  Year in which the [*] Unit  threshold  is met.  Units of
Licensed  Products that qualified  Publisher for inclusion in the Level 1 Rebate
program in the previous Fiscal Year shall not be entitled to receive the Level 1
Rebate.

      (iv) Publisher must  re-qualify for the Level 1 Rebate Program each Fiscal
Year. If a Publisher  fails to requalify for any Fiscal Year,  then the Standard
Rebate  shall  apply in such  Fiscal  Year.  The first  Fiscal  Year for which a
Publisher  may  qualify  for the Level 1 Rebate  shall be the Fiscal Year ending
March 31, 2000, and if the Publisher  qualifies for the Level 1 Rebate,  it will
apply to Licensed

-------------------
*    Confidential portions omitted and filed separately with the Commission.

                                       13
<PAGE>

                                                                    CONFIDENTIAL

Products ordered in the Fiscal Year commencing April 1, 2000.

      (v) Licensed Products eligible for the Level 1 Rebate program shall not be
eligible for Standard  Rebates,  and Level 1 Rebates  shall  supersede  Standard
Rebates with respect to any individual  Licensed Product.  If a Licensed Product
qualifies for the Standard  Rebate in one Fiscal Year,  and Publisher  qualifies
for the Level 1 Rebate in the next Fiscal Year,  Units of such Licensed  Product
ordered in the next Fiscal Year will  receive the Level 1 Rebate  commencing  on
April 1 of the next Fiscal Year going forward,  but such Level 1 Rebate will not
be  credited  retroactively  to Units of the  Licensed  Product  ordered  in the
previous  Fiscal Year. For example,  Publisher  orders [*] Units of Product X in
Fiscal Year 2001,  receiving a Standard Rebate of [*].  Publisher  qualifies for
the Level 1 Rebate in Fiscal  Year  2002.  Publisher  will  receive  the Level 1
Rebate of [*]  commencing  with Units  ordered  on April 1,  2001,  but will not
receive a  retroactive  credit for Units  ordered  prior to April 1, 2001.  When
Publisher reaches the [*] Unit threshold,  it will receive a retroactive  credit
of [*] on all Level 1 Rebate Units ordered,  as well as a retroactive  credit of
[*] on Standard  Rebate Units ordered in the previous Fiscal Year, and Publisher
will receive the Level 1 Rebate of [*] going forward.

         8.4.3 Level 2 Rebate  Program:  To be  eligible  for the Level 2 Rebate
program,  Publisher must ship over [*] Units of certain Licensed Products in any
Fiscal Year.  Level 2 Rebates  shall be credited to  Publisher on an  individual
title basis. Other terms of the Level 2 Rebate are as follows:

      (i) Only Publisher's  titles (as determined below) that meet the following
conditions  shall count toward the [*] Unit  threshold:  Publisher must order at
least [*] Units of the Licensed Product both within the first year of commercial
release of such Licensed Product and during the qualifying Fiscal Year.

      (ii) Any Licensed Products,  including "Greatest Hits" titles and products
for the original  PlayStation game console,  but excluding all demo discs, shall
count toward the [*] Unit threshold (provided they meet the conditions set forth
in  Section  8.4.3(i)  above).  For  purposes  of  determining  Level  2  Rebate
thresholds  and the  conditions  set  forth in  Section  8.4.2(i),  full  priced
Licensed  Products and "Greatest  Hits"  Licensed  Products  shall be considered
separate Licensed Products, with separate Unit minimums and release dates.

      (iii) Level 2 Rebates shall apply only to Licensed Products (not including
"Greatest  Hits" titles,  Licensed  Products  qualifying for the [*] royalty and
products for the original  PlayStation  game console) ordered in the Fiscal Year
following  the  Fiscal  Year in which the [*] Unit  threshold  is met.  Units of
Licensed  Products that qualified  Publisher for inclusion in the Level 2 Rebate
program in the previous Fiscal Year shall not be entitled to receive the Level 2
Rebate.

      (iv) Publisher must  re-qualify for the Level 2 Rebate Program each Fiscal
Year.  If  Publisher  fails to  requalify  for any Fiscal Year then the Standard
Rebate or Level 1 Rebate,  as the case may be,  shall apply in such Fiscal Year.
The first  Fiscal Year for which a Publisher  may qualify for the Level 2 Rebate
shall be the Fiscal Year ending March 31, 2000,  and if the Publisher  qualifies
for the Level 2 Rebate, it will apply to Licensed Products ordered in the Fiscal
Year commencing April 1, 2000.

      (v) Licensed Products eligible for the Level 2 Rebate program shall not be
eligible  for  Standard  Rebates or Level 1 Rebates,  and Level 2 Rebates  shall
supersede  Standard  Rebates and Level 1 Rebates with respect to any  individual
Licensed  Product.  If a Licensed  Product  qualifies for the Standard Rebate or
Level 1 Rebate in one  Fiscal  Year,  and  Publisher  qualifies  for the Level 2
Rebate in the next Fiscal Year,  Units of such Licensed  Product  ordered in the
next Fiscal Year will receive the Level 2 Rebate going forward, but such Level 2
Rebate  will not be  credited  retroactively  to Units of the  Licensed  Product
ordered in the previous Fiscal Year. See Section 8.4.2(v) for an example.

      8.5  Calculation  and Use of Rebates.  Rebate  percentages  for all rebate
programs shall be credited  against  royalties owed SCEA and shall have no other
monetary value. All rebates,  whether under the Standard Rebate,  Level 1 Rebate
or Level 2 Rebate  Programs shall be issued by SCEA as a credit to Publisher for
use against future royalty payments. It is Publisher's  responsibility to inform
SCEA when it reaches any rebate  threshold.  In no event shall  Publisher take a
deduction off royalties owed SCEA or deduction off an invoice payable to SCEA on
current production unless and until SCEA issues a credit to Publisher in writing
or  unless  otherwise  agreed  in  writing.  From  time to time  SCEA may  allow
Publisher  to use  credits  in other  manners  on  terms  and  conditions  to be
determined  by SCEA.  Publisher  may use rebate  credits to procure  Development
Tools. Units of Licensed Products shall be considered "ordered" when Units first
begin to ship from a Designated Manufacturing Facility.

      8.6 Rebate Credits.  Subject to Sections 8.4.2(v) and 8.4.3(v), all rebate
programs  are  [*],  such  that  Publisher  receives  a credit  for each  rebate
percentage  against  [*] Units when it reaches the Unit  threshold  for the next
rebate  percentage.  SCEA shall credit  Publisher's  account with respect to [*]
rebates as follows:  (A) if Publisher's  initial order for a Licensed Product is
less than any  rebate  threshold  provided  above,  then SCEA  shall [*]  credit
Publisher's  account sixty (60) days following the date that Publisher  notifies
SCEA that orders of a Licensed Product exceed any rebate  threshold,  subject to
SCEA's right to confirm such information;  and (B) if Publisher's  initial order
for a Licensed Product reaches or exceeds any rebate  threshold  provided above,
then  Publisher  may credit the rebate amount set forth above as a separate line
item on

-------------------
*    Confidential portion omitted and filed separately with the Commission.

                                       14
<PAGE>

                                                                    CONFIDENTIAL

the Purchase  Order with  respect to such  Licensed  Product,  subject to SCEA's
confirmation right.

9.    Representations and Warranties.

      9.1  Representations  and Warranties of SCEA. SCEA represents and warrants
solely for the benefit of Publisher that SCEA has the right, power and authority
to enter into this Agreement and to fully perform its obligations hereunder.

      9.2 Representations and Warranties of Publisher.  Publisher represents and
warrants that:

      (i) There is no threatened or pending  action,  suit,  claim or proceeding
alleging  that the use by Publisher of all or any part of the Product  Software,
Product Proposals, Product Information, Printed Materials, Advertising Materials
or any underlying work or content embodied therein, or any name,  designation or
trademark used in conjunction with the Licensed Products  infringes or otherwise
violates any Intellectual  Property Right or other right or interest of any kind
whatsoever  of any third party,  or  otherwise  contesting  any right,  title or
interest of Publisher in or to the Product Software, Product Proposals,  Product
Information,  Printed Materials, Advertising Materials or any underlying work or
content  embodied  therein,  or any  name,  designation  or  trademark  used  in
conjunction with the Licensed Products;

      (ii) The Product Software, Product Proposals, Product Information, Printed
Materials  and  Advertising  Materials  and their  contemplated  use under  this
Agreement  do not and  shall  not  infringe  any  person's  or  entity's  rights
including without limitation,  patents,  copyrights (including rights in a joint
work),  trademarks,  trade dress,  trade secret,  rights of publicity,  privacy,
performance, moral rights, literary rights and any other third party right;

      (iii)  Publisher  has the right,  power and  authority  to enter into this
Agreement,  to grant SCEA the rights granted  hereunder and to fully perform its
obligations hereunder;

      (iv) The  making of this  Agreement  by  Publisher  does not  violate  any
separate  agreement,  rights or obligations  existing between  Publisher and any
other person or entity,  and,  throughout the term of this Agreement,  Publisher
shall  not  make any  separate  agreement  with any  person  or  entity  that is
inconsistent with any of the provisions of this Agreement;

      (v) Publisher has not sold, assigned, leased, licensed or in any other way
disposed  of or  encumbered  the rights  granted  to  Publisher  hereunder,  and
Publisher will not sell, assign,  lease,  license or in any other way dispose of
or encumber  any of such rights  except as expressly  permitted  hereunder or as
consented to by SCEA in writing;

      (vi)  Publisher  has obtained  the consent of all holders of  intellectual
property  rights  required to be obtained in connection  with use of any Product
Information by SCEA as licensed hereunder, and Product Information when provided
to SCEA in  accordance  with  the  terms  of this  Agreement  may be  published,
marketed,  distributed  and  sold by SCEA  in  accordance  with  the  terms  and
conditions of this Agreement and without SCEA  incurring any royalty,  residual,
union, guild or other fees;

      (vii) Publisher shall not make any  representation or give any warranty to
any person or entity expressly or implicitly on SCEA's behalf,  or to the effect
that the Licensed  Products are  connected in any way with SCEA (other than that
the Executable Software and/or Licensed Products have been developed,  marketed,
sold and/or distributed under license from SCEA);

      (viii)  In the  event  that  Executable  Software  is  delivered  to other
Licensed  Publishers  or Licensed  Developers  by Publisher in source code form,
Publisher will take all  precautions  consistent with the protection of valuable
trade  secrets  by  companies  in  high  technology  industries  to  ensure  the
confidentiality of such source code;

      (ix) The Executable Software and any Product Information delivered to SCEA
shall be in a commercially  acceptable form, free of significant bugs,  defects,
time bombs or  viruses  which  could  disrupt,  delay,  destroy  the  Executable
Software or System or render either of them less than fully useful, and shall be
fully  compatible  with the System  and any  peripherals  listed on the  Printed
Materials as compatible with the Licensed Product;

      (x) Each of the Licensed Products,  Executable Software, Printed Materials
and Advertising Materials shall be developed,  marketed, sold and distributed by
or at the  direction of Publisher  in an ethical  manner and in full  compliance
with all applicable federal, state,  provincial,  local and foreign laws and any
regulations and standards  promulgated  thereunder (including but not limited to
federal and state lottery laws as currently  interpreted  and enforced) and will
not contain any obscene or defamatory matter;

      (xi)  Publisher's  policies and practices with respect to the development,
marketing, sale, and/or distribution of the Licensed Products shall in no manner
reflect adversely upon the name, reputation or goodwill of SCEA;

      (xii)Publisher  has, or will contract with a Licensed  Developer  for, the
technical  expertise and resources  necessary to fulfill its  obligations  under
this Agreement; and

      (xiii)   Publisher  shall  make  no  false,   misleading  or  inconsistent
representations or claims with respect to any Licensed  Products,  the System or
SCEA.

10.   Indemnities; Limited Liability.

                                       15
<PAGE>

                                                                    CONFIDENTIAL

      10.1  Indemnification  by SCEA.  SCEA shall  indemnify and hold  Publisher
harmless from and against any and all third party claims,  losses,  liabilities,
damages, expenses and costs, including, without limitation,  reasonable fees for
attorneys,  expert witnesses and litigation  costs, and including costs incurred
in the  settlement  or  avoidance  of any such claim which result from or are in
connection with a breach of any of the representations or warranties provided by
SCEA herein; provided,  however, that Publisher shall give prompt written notice
to SCEA of the  assertion of any such claim,  and provided,  further,  that SCEA
shall have the right to select  counsel and  control the defense and  settlement
thereof. SCEA shall have the exclusive right, at its discretion, to commence and
prosecute  at its own  expense  any  lawsuit or to take such other  action  with
respect to such matters as shall be deemed appropriate by SCEA.  Publisher shall
provide SCEA, at no expense to Publisher,  reasonable assistance and cooperation
concerning any such matter;  and Publisher  shall not agree to the settlement of
any such claim, action or proceeding without SCEA's prior written consent.

      10.2 Indemnification By Publisher. Publisher shall indemnify and hold SCEA
harmless  from and  against any and all claims,  losses,  liabilities,  damages,
expenses  and  costs,  including,   without  limitation,   reasonable  fees  for
attorneys,  expert witnesses and litigation  costs, and including costs incurred
in the  settlement  or avoidance of any such claim,  which result from or are in
connection with (i) a breach of any of the provisions of this Agreement; or (ii)
infringement of a third party's  intellectual  property rights by Publisher;  or
(iii)  any  claims  of or in  connection  with any  personal  or  bodily  injury
(including  death) or property damage,  by whomever such claim is made,  arising
out of, in whole or in part,  the  development,  marketing,  sale,  distribution
and/or use of any of the  Licensed  Products (or  portions  thereof)  unless due
directly to the breach of SCEA in performing  any of the specific  duties and/or
providing any of the specific  services  required of it  hereunder;  or (iv) any
federal, state or foreign civil or criminal actions relating to the development,
marketing, sale and/or distribution of Licensed Products. SCEA shall give prompt
written notice to Publisher of the assertion of any such indemnified claim, and,
with respect to third party claims,  actions or proceedings  against SCEA,  SCEA
shall  have the right to select  counsel  for SCEA and  reasonably  control  the
defense and/or settlement  thereof.  Subject to the above,  Publisher shall have
the  right,  at its  discretion,  to select its own  counsel,  to  commence  and
prosecute  at its own expense any  lawsuit,  to  reasonably  control the defense
and/or  settlement  thereof or to take such other action with respect to claims,
actions or proceedings by or against  Publisher.  SCEA shall retain the right to
approve any  settlement.  SCEA shall provide  Publisher,  at no expense to SCEA,
reasonable assistance and cooperation concerning any such matter; and SCEA shall
not agree to the settlement of any such claim,  action or proceeding (other than
third party claims,  actions or  proceedings  against SCEA) without  Publisher's
prior written consent.

10.3  LIMITATION OF LIABILITY.

         10.3.1 LIMITATION OF SCEA'S LIABILITY.  IN NO EVENT SHALL SCEA OR OTHER
SONY AFFILIATES AND THEIR SUPPLIERS, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS BE
LIABLE FOR LOSS OF PROFITS, OR ANY SPECIAL,  PUNITIVE,  INCIDENTAL,  INDIRECT OR
CONSEQUENTIAL  DAMAGES  ARISING OUT OF,  RELATING TO OR IN CONNECTION  WITH THIS
AGREEMENT,  INCLUDING  WITHOUT  LIMITATION THE BREACH OF THIS AGREEMENT BY SCEA,
THE MANUFACTURE OF THE LICENSED  PRODUCTS AND THE USE OF THE LICENSED  PRODUCTS,
EXECUTABLE  SOFTWARE  AND/OR THE SYSTEM BY  PUBLISHER OR ANY  END-USER,  WHETHER
UNDER  THEORY OF  CONTRACT,  TORT  (INCLUDING  NEGLIGENCE),  INDEMNITY,  PRODUCT
LIABILITY  OR  OTHERWISE.  IN NO EVENT SHALL  SCEA'S  LIABILITY  ARISING  UNDER,
RELATING TO OR IN CONNECTION WITH THIS AGREEMENT,  INCLUDING WITHOUT  LIMITATION
ANY LIABILITY FOR DIRECT OR INDIRECT DAMAGES,  AND INCLUDING WITHOUT  LIMITATION
ANY  LIABILITY  UNDER  SECTION  10.1  HERETO,  EXCEED THE TOTAL  AMOUNT  PAID BY
PUBLISHER TO SCEA UNDER THIS  AGREEMENT.  EXCEPT AS EXPRESSLY  SET FORTH HEREIN,
NEITHER  SCEA NOR ANY SONY  AFFILIATE,  NOR ANY OF THEIR  RESPECTIVE  DIRECTORS,
OFFICERS,  EMPLOYEES OR AGENTS,  SHALL BEAR ANY RISK, OR HAVE ANY RESPONSIBILITY
OR  LIABILITY,  OF ANY KIND TO PUBLISHER OR TO ANY THIRD PARTIES WITH RESPECT TO
THE QUALITY,  OPERATION AND/OR PERFORMANCE OF ANY PORTION OF THE SONY MATERIALS,
THE SYSTEM OR ANY LICENSED PRODUCT.

         10.3.2 LIMITATION OF PUBLISHER'S LIABILITY. IN NO EVENT SHALL PUBLISHER
OR ITS AFFILIATED COMPANIES AND THEIR SUPPLIERS,  OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS BE LIABLE TO SCEA FOR ANY LOSS OF PROFITS,  OR ANY SPECIAL,  PUNITIVE,
INCIDENTAL,  INDIRECT OR CONSEQUENTIAL  DAMAGES ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH (i) THIS AGREEMENT OR (ii) THE USE OR DISTRIBUTION IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT OF ANY CODE PROVIDED BY SCEA, IN
WHOLE OR IN PART, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE),
INDEMNITY, PRODUCT LIABILITY OR OTHERWISE,  PROVIDED THAT SUCH

                                       16
<PAGE>

                                                                    CONFIDENTIAL

LIMITATIONS  SHALL NOT APPLY TO DAMAGES  RESULTING  FROM  PUBLISHER'S  BREACH OF
SECTIONS 4, 10.2,  11 OR 13 OF THIS  AGREEMENT,  AND PROVIDED  FURTHER THAT SUCH
LIMITATIONS SHALL NOT APPLY TO AMOUNTS WHICH PUBLISHER MAY BE REQUIRED TO PAY TO
THIRD PARTIES UNDER SECTIONS 10.2 OR 16.10.

      10.4  DISCLAIMER  OF  WARRANTY.  EXCEPT AS OTHERWISE  EXPRESSLY  SET FORTH
HEREIN,  NEITHER SCEA NOR ITS AFFILIATES AND SUPPLIERS  MAKE, NOR DOES PUBLISHER
RECEIVE,  ANY  REPRESENTATIONS  OR  WARRANTIES,  EXPRESS,  IMPLIED OR STATUTORY,
REGARDING THE SONY MATERIALS,  SCEA'S  CONFIDENTIAL  INFORMATION THE SYSTEM, THE
UNITS OF THE LICENSED PRODUCTS MANUFACTURED HEREUNDER AND/OR PUBLISHER'S PRODUCT
INFORMATION  INCLUDED  ON SCEA DEMO  DISCS.  SCEA  SHALL  NOT BE LIABLE  FOR ANY
INJURY, LOSS OR DAMAGE,  DIRECT,  INDIRECT OR CONSEQUENTIAL,  ARISING OUT OF THE
USE OR INABILITY TO USE ANY UNITS AND/OR ANY SOFTWARE  ERRORS  AND/OR  "BUGS" IN
PUBLISHER'S  PRODUCT  INFORMATION  WHICH MAY BE  REPRODUCED  ON SCEA DEMO DISCS.
WITHOUT  LIMITING THE GENERALITY OF THE  FOREGOING,  SCEA AND ITS AFFILIATES AND
SUPPLIERS  EXPRESSLY  DISCLAIM THE IMPLIED  WARRANTIES  OF  MERCHANTABILITY  AND
FITNESS FOR A  PARTICULAR  PURPOSE AND THEIR  EQUIVALENTS  UNDER THE LAWS OF ANY
JURISDICTION,  REGARDING THE SONY MATERIALS,  SCEA'S  CONFIDENTIAL  INFORMATION,
LICENSED  PRODUCTS,  SCEA  DEMO  DISCS  AND THE  SYSTEM.  ANY  WARRANTY  AGAINST
INFRINGEMENT THAT MAY BE PROVIDED IN SECTION 2-312(3) OF THE UNIFORM  COMMERCIAL
CODE AND/OR IN ANY OTHER COMPARABLE STATUTE IS EXPRESSLY DISCLAIMED.

11.   SCEA Intellectual Property Rights.

      11.1  Licensed  Trademarks.  The  Licensed  Trademarks  and  the  goodwill
associated  therewith  are  and  shall  be the  exclusive  property  of  SCEA or
Affiliates of SCEA.  Nothing  herein shall give  Publisher  any right,  title or
interest in or to any of the  Licensed  Trademarks  or any other  trademarks  of
SCEA, other than the non-exclusive license provided herein.  Publisher shall not
do or  cause to be done any act or thing  in any way  impairing  or  tending  to
impair or dilute any of SCEA's  rights,  title or  interests in or to any of the
Licensed  Trademarks  or any  other  trademarks  of SCEA,  nor  shall  Publisher
register  any  trademark  in its own name or in the name of any other  person or
entity, or obtain rights to employ Internet domain names or addresses, which are
similar to or are likely to be confused  with any of the Licensed  Trademarks or
any other trademarks of SCEA.

      11.2 License of Sony Materials and System.  All rights with respect to the
Sony  Materials  and  System,  including,   without  limitation,   all  of  SCEA
Intellectual Property Rights therein, are and shall be the exclusive property of
SCEA or Affiliates of SCEA. Nothing herein shall give Publisher any right, title
or interest in or to the Sony Materials or the System (or any portion  thereof),
other than the non-exclusive license provided herein.  Publisher shall not do or
cause to be done any act or thing in any way  impairing or tending to impair any
of SCEA's  rights,  title or interests in or to the Sony Materials or the System
(or any portion thereof).

12.   Infringement of SCEA Intellectual Property Rights By Third Parties.

In the event that Publisher discovers or otherwise becomes aware that any of the
SCEA  Intellectual  Property Rights have been or are being infringed upon by any
third party, then Publisher shall promptly notify SCEA. SCEA shall have the sole
right,  in its  discretion,  to institute and prosecute  lawsuits  against third
parties for such infringement of SCEA Intellectual  Property Rights. Any lawsuit
shall  be  prosecuted  solely  at the  cost  and  expense  of SCEA  and all sums
recovered in any such  lawsuits,  whether by judgment,  settlement  or otherwise
shall belong solely to SCEA.  Upon request of SCEA,  Publisher shall execute all
papers,  testify on all matters and  otherwise  cooperate in every way necessary
and desirable for the  prosecution  of any such  lawsuit.  SCEA shall  reimburse
Publisher for the reasonable  expenses incurred as a result of such cooperation,
but unless  authorized  by other  provisions  of this  Agreement,  not costs and
expenses attributable to the conduct of a cross-claim or third party action.

13.   Confidentiality.

      13.1 SCEA's Confidential Information.

         13.1.1   Definition  of  SCEA's   Confidential   Information.   "SCEA's
Confidential Information" shall mean:

      (i) the System, Sony Materials and Development Tools;

      (ii) other documents and materials developed, owned, licensed or under the
control of Sony, including all processes, data, hardware, software,  inventions,
trade   secrets,   ideas,   creations,   improvements,   designs,   discoveries,
developments, research and know-how, including without limitation the SourceBook
2 and SCEA Intellectual  Property Rights relating to the System,  Sony Materials
or Development Tools; and

                                       17
<PAGE>

                                                                    CONFIDENTIAL

     (iii)  information  and  documents  regarding  SCEA's  finances,  business,
marketing and technical plans, business methods and production plans.

SCEA's  Confidential  Information  may  consist of  information  in any  medium,
whether  oral,  printed,  in  machine-readable  form  or  otherwise,   including
information apprised to Publisher and reduced to tangible or written form at any
time  during  the  term of this  Agreement.  In  addition,  the  existence  of a
relationship  between Publisher and SCEA for the purposes set forth herein shall
be deemed to be SCEA's  Confidential  Information  unless otherwise agreed to in
writing by the parties or until publicly announced by SCEA.

            13.1.2 Term of Protection of SCEA's  Confidential  Information.  The
term for the protection of SCEA's Confidential Information shall commence on the
Effective  Date first above written and shall  continue in full force and effect
as long as any of SCEA's Confidential  Information continues to be maintained as
confidential  and proprietary by SCEA and/or Sony.  During such term,  Publisher
shall,  pursuant  to  Section  13.1.3  below,  safeguard  and hold in trust  and
confidence  and not disclose or use (except for the purposes  herein  specified)
any and all of SCEA's Confidential Information.

            13.1.3  Preservation of SCEA's Confidential  Information.  Publisher
shall, with respect to SCEA's Confidential Information:

     (i) not disclose SCEA's  Confidential  Information to any person or entity,
other than those  employees or directors of the Publisher whose duties justify a
"need-to-know"  and who have executed a confidentiality  agreement in which such
employees or directors have agreed not to disclose and to hold  confidential all
confidential  information  and materials  (inclusive of those of third  parties)
which may be  disclosed  to them or to which  they may have  access  during  the
course of their duties.  At SCEA's request,  Publisher shall provide SCEA with a
copy of such  confidentiality  agreement  between Publisher and its employees or
directors,  and shall also  provide  SCEA with a list of employee  and  director
signatories. Publisher shall not disclose any of SCEA's Confidential Information
to third parties,  including  without  limitation to consultants or agents.  Any
employees  or directors  who obtain  access to SCEA's  Confidential  Information
shall be advised by Publisher of the confidential  nature of SCEA's Confidential
Information, and Publisher shall be responsible for any breach of this Agreement
by its employees or directors.

     (ii)  take  all  measures   necessary  to  safeguard  SCEA's   Confidential
Information in order to avoid disclosure,  publication, or dissemination,  using
as high a degree  of care and  scrutiny,  but at least  reasonable  care,  as is
consistent  with the  protection of valuable  trade secrets by companies in high
technology industries.

     (iii) ensure that all written  materials  relating to or containing  SCEA's
Confidential  Information be maintained in a restricted  access area and plainly
marked to indicate the secret and confidential nature thereof.

     (iv) at SCEA's  request,  return  promptly to SCEA any and all  portions of
SCEA's Confidential Information, together with all copies thereof.

     (v) not  use,  modify,  reproduce,  sublicense,  copy,  distribute,  create
derivative   works  from,  or  otherwise   provide  to  third  parties,   SCEA's
Confidential Information, or any portion thereof, except as provided herein, nor
shall Publisher  remove any proprietary  legend set forth on or contained within
any of SCEA's Confidential Information.

            13.1.4 Exceptions. The foregoing restrictions shall not apply to any
portion of SCEA's Confidential Information which:

     (i) was previously known to Publisher without  restriction on disclosure or
use, as proven by written documentation of Publisher; or

     (ii) is or legitimately  becomes part of the public domain through no fault
of Publisher or its employees; or

     (iii) is independently  developed by Publisher's employees who have not had
access to SCEA's Confidential Information, as proven by written documentation of
Publisher; or

     (iv) is required to be  disclosed  by  administrative  or judicial  action;
provided that Publisher must attempt to maintain the  confidentiality  of SCEA's
Confidential  Information by asserting in such action the restrictions set forth
in this Agreement, and, immediately after receiving notice of such action or any
notice of any  threatened  action,  Publisher  must notify SCEA to give SCEA the
maximum  opportunity  to seek any other legal  remedies to maintain  such SCEA's
Confidential Information in confidence as herein provided; or

     (v) is approved for release by written authorization of SCEA.

            13.1.5 No Obligation to License.  Disclosure of SCEA's  Confidential
Information to Publisher shall not constitute any option,  grant or license from
SCEA to Publisher  under any patent or other SCEA  Intellectual  Property Rights
now or  hereinafter  held by SCEA. The disclosure by SCEA to Publisher of SCEA's
Confidential  Information  hereunder  shall not result in any  obligation on the
part of SCEA to approve any materials of Publisher  hereunder or otherwise,  nor
shall  such  disclosure  by SCEA  give  Publisher  any  right  to,  directly  or
indirectly,  develop, manufacture or sell any product derived from or which uses
any of SCEA's  Confidential  Information,  other than as expressly  set forth in
this Agreement.

                                       18
<PAGE>

                                                                    CONFIDENTIAL

            13.1.6 Publisher's Obligations Upon Unauthorized  Disclosure.  If at
any time Publisher becomes aware of any unauthorized  duplication,  access, use,
possession or knowledge of any SCEA's Confidential Information,  it shall notify
SCEA as soon as reasonably  practicable,  and shall  promptly act to recover any
such information and prevent further breach of the  confidentiality  obligations
herein.  Publisher  shall provide any and all  reasonable  assistance to SCEA to
protect SCEA's proprietary rights in any of SCEA's Confidential Information that
it or its employees or permitted  subcontractors may have directly or indirectly
disclosed  or made  available,  and  that  may be  duplicated,  accessed,  used,
possessed or known in a manner or for a purpose not expressly authorized by this
Agreement,   including  but  not  limited  to  enforcement  of   confidentiality
agreements,  commencement  and  prosecution  in good  faith  (alone  or with the
disclosing  party)  of  legal  action,  and  reimbursement  for  all  reasonable
attorneys' fees, costs and expenses  incurred by SCEA to protect its proprietary
rights  in  SCEA's  Confidential  Information.  Publisher  shall  take all steps
requested by SCEA to prevent the  recurrence  of any  unauthorized  duplication,
access,  use,  possession or knowledge of SCEA's  Confidential  Information.  In
addition,  SCEA shall have the right to pursue any  actions at law or in equity,
including without limitation the remedies set forth in Section 16.10 hereto.

     13.2 Publisher's Confidential Information.

            13.2.1   Definition   of   Publisher's   Confidential   Information.
"Publisher's Confidential Information" shall mean:

     (i) any Product Software as provided to SCEA pursuant to this Agreement and
all documentation and information relating thereto, including Product Proposals,
Printed  Materials  and  Advertising  Materials  (other than  documentation  and
information  intended for use by and release to end users, the general public or
the trade);

     (ii) other documents and materials developed,  owned, licensed or under the
control  of  Publisher,  including  all  processes,  data,  hardware,  software,
inventions, trade secrets, ideas, creations, improvements, designs, discoveries,
developments, research and know-how; and

     (iii) information and documents regarding Publisher's  finances,  business,
marketing and technical plans, business methods and production plans.

Publisher's  Confidential  Information may consist of information in any medium,
whether  oral,  printed,  in  machine-readable  form  or  otherwise,   including
information apprised to SCEA and reduced to tangible or written form at any time
during the term of this Agreement.

            13.2.2 Term of Protection of Publisher's  Confidential  Information.
The  term for the  protection  of  Publisher's  Confidential  Information  shall
commence on the Effective  Date first above  written and shall  continue in full
force  and  effect  as  long  as any  of  Publisher's  Confidential  Information
continues to be maintained as confidential and proprietary by Publisher.

            13.2.3 Preservation of Confidential  Information of Publisher.  SCEA
shall, with respect to Publisher's Confidential Information:

     (i) hold all Publisher's Confidential Information in confidence,  and shall
take all  reasonable  steps  to  preserve  the  confidentiality  of  Publisher's
Confidential Information,  and to prevent it from falling into the public domain
or into the possession of persons other than those persons to whom disclosure is
authorized hereunder.

     (ii) not disclose Publisher's  Confidential Information to any person other
than an SCEA employee or subcontractor  who needs to know or have access to such
Confidential  Information  for the purposes of this  Agreement,  and only to the
extent necessary for such purposes.

     (iii)  ensure  that  all  written  materials   relating  to  or  containing
Publisher's  Confidential Information be maintained in a secure area and plainly
marked to indicate the secret and confidential nature thereof.

     (iv) at  Publisher's  request,  return  promptly to  Publisher  any and all
portions  of  Publisher's  Confidential  Information,  together  with all copies
thereof.

     (v) not use Publisher's Confidential  Information,  or any portion thereof,
except as  provided  herein,  nor shall SCEA remove any  proprietary  legend set
forth on or contained within any of Publisher's Confidential Information.

            13.2.4 Exceptions.  The foregoing restrictions will not apply to any
portion of Publisher's Confidential Information which:

     (i) was previously known to SCEA without  restriction on disclosure or use,
as proven by written documentation of SCEA; or

     (ii) is or  legitimately  becomes part of  information in the public domain
through no fault of SCEA, its employees or its subcontractors; or

     (iii) is independently developed by SCEA's employees or affiliates who have
not had access to  Publisher's  Confidential  Information,  as proven by written
documentation of SCEA; or

     (iv) is required to be  disclosed  by  administrative  or judicial  action;
provided  that SCEA  attempted to maintain the  confidentiality  of  Publisher's
Confidential  Information by asserting in such action the restrictions set forth
in this  Agreement,  and  immediately  after  receiving  notice of such  action,
notified  Publisher of such action to give Publisher

                                       19
<PAGE>

                                                                    CONFIDENTIAL

the  opportunity to seek any other legal  remedies to maintain such  Publisher's
Confidential Information in confidence as herein provided; or

     (vi) is approved for release by written authorization of Publisher.

            13.2.5 SCEA's  Obligations Upon Unauthorized  Disclosure.  If at any
time SCEA becomes aware of any unauthorized duplication, access, use, possession
or knowledge of any of  Publisher's  Confidential  Information,  it shall notify
Publisher as soon as is reasonably  practicable.  SCEA shall provide any and all
reasonable assistance to Publisher to protect Publisher's  proprietary rights in
any  of  Publisher's  Confidential  Information  that  it or  its  employees  or
permitted  subcontractors  may have  directly or  indirectly  disclosed  or made
available and that may be duplicated,  accessed,  used,  possessed or known in a
manner or for a purpose not expressly authorized by this Agreement including but
not limited to  enforcement  of  confidentiality  agreements,  commencement  and
prosecution in good faith (alone or with the disclosing  party) of legal action,
and  reimbursement  for all  reasonable  attorneys'  fees,  costs  and  expenses
incurred  by  Publisher  to  protect  its  proprietary   rights  in  Publisher's
Confidential  Information.  SCEA shall take all  reasonable  steps  requested by
Publisher to prevent the  recurrence of any  unauthorized  duplication,  access,
use, possession or knowledge of Publisher's Confidential Information.

     13.3  Confidentiality  of  Agreement.  The  terms  and  conditions  of this
Agreement  shall be treated as SCEA's  Confidential  Information and Publisher's
Confidential  Information;  provided  that each party may disclose the terms and
conditions of this Agreement:

     (i) to legal counsel;

     (ii) in confidence,  to accountants,  banks and financing sources and their
advisors;

     (iii) in confidence,  in connection  with the enforcement of this Agreement
or rights arising under or relating to this Agreement; and

     (iv) if required,  in the opinion of counsel, to file publicly or otherwise
disclose  the terms of this  Agreement  under  applicable  federal  and/or state
securities  or other laws,  the  disclosing  party shall be required to promptly
notify the other party such that the other party has a reasonable opportunity to
contest or limit the scope of such required disclosure, and the disclosing party
shall request, and shall use its best efforts to obtain,  confidential treatment
for such sections of this Agreement as the other party may designate.

14.  Term and Termination.

     14.1  Effective  Date;  Term.  This  Agreement  shall not be binding on the
parties  until it has been  signed  by each  party,  in which  event it shall be
effective  from  the  Effective  Date  until  March  31,  2003,  unless  earlier
terminated  pursuant to Section 14.2. The term shall be  automatically  extended
for additional one-year terms thereafter, unless either party provides the other
with written  notice of its election not to so extend on or before January 31 of
the applicable year.  Notwithstanding  the foregoing the term for the protection
of SCEA's  Confidential  Information  and Publisher's  Confidential  Information
shall be as set forth in Sections 13.1.2 and 13.2.2 respectively.

     14.2  Termination  by SCEA.  SCEA  shall have the right to  terminate  this
Agreement  immediately,   by  providing  written  notice  of  such  election  to
Publisher, upon the occurrence of any of the following:

     (i) If Publisher breaches (A) any of its obligations hereunder;  or (B) any
other agreement entered into between SCEA or Affiliates of SCEA and Publisher.

     (ii) The  liquidation  or dissolution of Publisher or a statement of intent
by  Publisher  to no  longer  exercise  any of the  rights  granted  by  SCEA to
Publisher hereunder.

     (iii) If during  the term of this  Agreement,  a  controlling  interest  in
Publisher  or in an  entity  which  directly  or  indirectly  has a  controlling
interest in  Publisher  is  transferred  to a party that (A) is in breach of any
agreement with SCEA or an Affiliate of SCEA; (B) directly or indirectly holds or
acquires a controlling  interest in a third party which develops any interactive
device or product which is directly or indirectly  competitive  with the System;
or (C)  is in  litigation  with  SCEA  or  Affiliates  of  SCEA  concerning  any
proprietary technology, trade secrets or other SCEA Intellectual Property Rights
or SCEA's Confidential  Information.  As used in this Section 14.2, "controlling
interest" means, with respect to any form of entity, sufficient power to control
the decisions of such entity.

     (iv) If during  the term of this  Agreement,  Publisher  or an entity  that
directly or  indirectly  has a controlling  interest in Publisher  enters into a
business  relationship  with  a  third  party  with  whom  Publisher  materially
contributes to develop core components to an interactive device or product which
is directly or indirectly competitive with the System.

Publisher shall immediately  notify SCEA in writing in the event that any of the
events or circumstances specified in this Section occur.

     14.3  Product-by-Product  Termination by SCEA. In addition to the events of
termination  described in Section 14.2,  above,  SCEA,  at its option,  shall be
entitled to terminate,  on a product-by-product  basis, the licenses and related
rights  herein  granted to  Publisher in the event that (a)  Publisher  fails to
notify  SCEA  promptly  in  writing  of any  material  change  to any  materials
previously

                                       20
<PAGE>

                                                                    CONFIDENTIAL

approved by SCEA in  accordance  with Section 5 or Section 6.1 hereto,  and such
breach is not  corrected  or cured  within  thirty  (30) days  after  receipt of
written  notice of such breach;  (b) Publisher  uses a third party that fails to
comply with the  requirements of Section 3 in connection with the development of
any Licensed Product; (c) any third party with whom Publisher has contracted for
the development of Executable Software breaches any of its material  obligations
to SCEA pursuant to such third party's  agreement with SCEA with respect to such
Licensed  Product;  or (d)  Publisher  cancels a  Licensed  Product  or fails to
provide SCEA in  accordance  with the  provisions  of Section 5 above,  with the
final version of the Executable  Software for any Licensed  Product within three
(3) months of the  scheduled  release  date  according  to the Product  Proposal
(unless a modified  final  delivery date has been agreed to by the parties),  or
fails to provide work in progress to SCEA in strict  accordance  with the Review
Process in Section 5.3.

     14.4 Options of SCEA in Lieu of Termination. As alternatives to terminating
this  Agreement or a particular  Licensed  Product as set forth in Sections 14.2
and 14.3 above,  SCEA may, at its option and upon written  notice to  Publisher,
take the following  actions in lieu of terminating this Agreement.  In the event
that SCEA elects either of these options, Publisher may terminate this Agreement
upon written notice to SCEA rather than allowing SCEA to exercise these options.
Election of these options by SCEA shall not constitute a waiver of or compromise
with respect to any of SCEA's rights under this  Agreement and SCEA may elect to
terminate this Agreement with respect to any breach.

            14.4.1  Suspension  of Agreement.  SCEA may suspend this  Agreement,
entirely or with respect to a particular Licensed Product or program,  for a set
period of time  which  shall be  specified  in  writing  to  Publisher  upon the
occurrence of any breach of this Agreement.

            14.4.2  Liquidated  Damages.  Whereas  a minor  breach of any of the
events set out below may not warrant  termination  of this  Agreement,  but will
cause SCEA damages in amounts difficult to quantify,  SCEA may require Publisher
to pay liquidated damages of [*] per event as follows:

     (i) Failure to submit Advertising Materials to SCEA for approval (including
any required resubmissions);

     (ii) Broadcasting or publishing Advertising Materials without receiving the
final approval or consent of SCEA;

     (iii) Failure to make SCEA's requested revisions to Advertising  Materials;
or

     (iv) Failure to comply with the SourceBook 2, Manufacturing  Specifications
or Guidelines which relates in any way to use of Licensed Trademarks.

Liquidated  damages shall be invoiced  separately or on Publisher's next invoice
for Licensed  Products.  SCEA reserves the right to terminate this Agreement for
breach in lieu of seeking  liquidated  damages  or in the event that  liquidated
damages are unpaid.

     14.5 No  Refunds.  In the event of the  termination  of this  Agreement  in
accordance  with any of the  provisions of Sections 14.2 through 14.4 above,  no
portion of any  payments  of any kind  whatsoever  previously  provided  to SCEA
hereunder shall be owed or be repayable to Publisher.

15.  Effect of Expiration or Termination.

     15.1 Inventory Statement. Within thirty (30) days of the date of expiration
or the  effective  date  of  termination  with  respect  to any or all  Licensed
Products  or this  Agreement,  Publisher  shall  provide  SCEA with an  itemized
statement,  certified to be accurate by an officer of Publisher,  specifying the
number of unsold  Units of the  Licensed  Products as to which such  termination
applies,  on a title-by-title  basis, which remain in its inventory and/or under
its control at the time of expiration or the effective date of termination. SCEA
shall be entitled to conduct at its expense a physical inspection of Publisher's
inventory  and work in process upon  reasonable  written  notice  during  normal
business  hours in order to ascertain  or verify such  inventory  and  inventory
statement.

     15.2 Reversion of Rights.  Upon  expiration or  termination  and subject to
Section 15.3 below,  the licenses and related rights herein granted to Publisher
shall immediately revert to SCEA, and Publisher shall cease from any further use
of SCEA's Confidential  Information,  Licensed Trademarks and Sony Materials and
any SCEA Intellectual Property Rights therein, and, subject to the provisions of
Section  15.3  below,  Publisher  shall have no further  right to  continue  the
development,  publication,  manufacture,  marketing, sale or distribution of any
Units of the Licensed Products,  or to continue to use any Licensed  Trademarks;
provided, however, that for a period of one year after termination,  and subject
to all the terms of Section 13, and provided  this  Agreement is not  terminated
due to a breach or default of  Publisher,  Publisher may retain such portions of
Sony  Materials  and  SCEA's  Confidential  Information  as  SCEA  in  its  sole
discretion  agrees are  required to support end users of Licensed  Products  but
must return these materials at the end of such one year period.  Upon expiration
or  termination,  the  licenses  and related  rights  herein  granted to SCEA by
Publisher shall immediately  revert to Publisher,  and SCEA shall cease from any
further  use of Product  Information  and any  Publisher  Intellectual  Property
Rights therein; provided that SCEA may continue the manufacture, marketing, sale
or  distribution  of  any  SCEA  Demo  Discs  containing   Publisher's   Product
Information which Publisher had approved prior to termination.

-------------------
*    Confidential portion omitted and filed separately with the Commission.

                                       21
<PAGE>

                                                                    CONFIDENTIAL

     15.3  Disposal  of  Unsold  Units.  Provided  that  this  Agreement  is not
terminated  due to a  breach  or  default  of  Publisher,  Publisher  may,  upon
expiration or termination of this  Agreement,  sell off existing  inventories of
Licensed  Products,  on a non-exclusive  basis, for a period of ninety (90) days
from the date of expiration or termination of this Agreement,  and provided such
inventories  have not been  manufactured  solely or principally  for sale during
such period.  Subsequent to the expiration of such ninety (90) day period, or in
the event this  Agreement is  terminated as a result of any breach or default of
Publisher,  any and all Units of the Licensed Products  remaining in Publisher's
inventory shall be destroyed by Publisher  within five (5) business days of such
expiration or termination. Within five (5) business days after such destruction,
Publisher  shall  provide  SCEA  with an  itemized  statement,  certified  to be
accurate  by an  officer  of  Publisher,  indicating  the number of Units of the
Licensed  Products which have been destroyed (on a  title-by-title  basis),  the
location and date of such destruction and the disposition of the remains of such
destroyed materials.

     15.4  Return  of Sony  Materials  and  Confidential  Information.  Upon the
expiration or earlier termination of this Agreement, Publisher shall immediately
deliver to SCEA,  or if and to the extent  requested by SCEA  destroy,  all Sony
Materials and any and all copies thereof, and Publisher and SCEA shall, upon the
request of the other party, immediately deliver to the other party, or if and to
the extent requested by such party destroy, all Confidential  Information of the
other  party,  including  any and all  copies  thereof,  which the  other  party
previously  furnished to it in  furtherance of this  Agreement.  Within five (5)
working days after any such destruction,  Publisher and/or SCEA, as appropriate,
shall provide the other party with an affidavit of  destruction  and an itemized
statement, each certified to be accurate by an officer of Publisher,  indicating
the number of copies  and/or  units of the Sony  Materials  and/or  Confidential
Information which have been destroyed, the location and date of such destruction
and the  disposition  of the remains of such destroyed  materials.  In the event
that Publisher  fails to return the Sony Materials or  Confidential  Information
and SCEA must resort to legal means  (including  without  limitation  any use of
attorneys)  to recover the Sony  Materials or  Confidential  Information  or the
value thereof, all costs,  including SCEA's reasonable attorney's fees, shall be
borne by Publisher, and SCEA may, in addition to SCEA's other remedies, withhold
such amounts  from any payment  otherwise  due from SCEA to Publisher  under any
agreement between SCEA and Publisher.

     15.5 Extension of this Agreement; Termination Without Prejudice. SCEA shall
be under no  obligation  to extend this  Agreement  notwithstanding  any actions
taken by either of the parties prior to the expiration of this  Agreement.  Upon
the expiration of this Agreement, neither party shall be liable to the other for
any  damages  (whether  direct,  indirect,   consequential  or  incidental,  and
including, without limitation, any expenditures,  loss of profits or prospective
profits)  sustained  or arising out of or alleged to have been  sustained  or to
have  arisen out of such  expiration.  The  expiration  or  termination  of this
Agreement  shall be without  prejudice to any rights or remedies which one party
may  otherwise  have against the other party,  and shall not excuse either party
from any such expiration or termination.

16.  Miscellaneous Provisions.

     16.1 Notices. All notices or other communications required or desired to be
sent  to  either  of the  parties  shall  be in  writing  and  shall  be sent by
registered  or  certified  mail,   postage   prepaid,   or  sent  by  recognized
international courier service,  telegram or facsimile, with charges prepaid. The
address for all notices or other  communications  required to be sent to SCEA or
Publisher,  respectively,  shall be the mailing  address  stated in the preamble
hereof,  or such other  address as may be  provided  by written  notice from one
party to the other on at least ten (10) days'  prior  written  notice.  Any such
notice  shall be  effective  upon the date of actual or  tendered  delivery,  as
confirmed by the sending party.

     16.2 Audit Provisions.  Publisher shall keep full,  complete,  and accurate
books  of  account  and  records  covering  all  transactions  relating  to this
Agreement.  Publisher shall preserve such books of account, records,  documents,
and material for a period of  twenty-four  (24) months after the  expiration  or
earlier  termination  of this  Agreement.  Acceptance  by SCEA of an  accounting
statement,  purchase  order,  or payment  hereunder  will not preclude SCEA from
challenging  or questioning  the accuracy  thereof at a later time. In the event
that SCEA  reasonably  believes that the Wholesale  Price  provided by Publisher
with respect to any Licensed Product is not accurate,  SCEA shall be entitled to
request additional  documentation from Publisher to support the listed Wholesale
Price for such Licensed Product.  In addition,  during the Term and for a period
of two (2) years thereafter and upon the giving of reasonable  written notice to
Publisher,  representatives  of SCEA shall have access to, and the right to make
copies and summaries of, such portions of all of  Publisher's  books and records
as pertain to the Licensed  Products  and any  payments due or credits  received
hereunder.  In the event that such inspection  reveals an under-reporting of any
payment due to SCEA,  Publisher shall  immediately pay SCEA such amount.  In the
event that any audit conducted by SCEA reveals that Publisher has under-reported
any payment due to SCEA hereunder by [*] or more for that audit period,  then in
addition to the payment of the appropriate  amount due to SCEA,  Publisher shall
reimburse  SCEA for all  reasonable  audit  costs for that audit and any and all
collection costs to recover the unpaid amount.

     16.3 Force Majeure. Neither SCEA nor Publisher shall be liable for any loss
or damage or be deemed to be in  breach  of this  Agreement  if its  failure  to
perform or failure to cure any of its obligations  under this Agreement  results
from any event or circumstance beyond its reasonable

-------------------
*    Confidential portion omitted and filed separately with the Commission.

                                       22
<PAGE>

                                                                    CONFIDENTIAL

control,  including,  without  limitation,  any natural  disaster,  fire, flood,
earthquake or other Act of God;  shortage of equipment,  materials,  supplies or
transportation facilities; strike or other industrial dispute; war or rebellion;
shutdown  or delay in power,  telephone  or other  essential  service due to the
failure of computer or communications equipment or otherwise; provided, however,
that the party  interfered  with gives the other party  written  notice  thereof
promptly,  and, in any event,  within fifteen (15) business days of discovery of
any such  Force  Majeure  condition.  If  notice of the  existence  of any Force
Majeure  condition is provided  within such period,  the time for performance or
cure shall be extended for a period  equal to the duration of the Force  Majeure
event or circumstance described in such notice, except that any such cause shall
not  excuse the  payment of any sums owed to SCEA prior to,  during or after any
such Force  Majeure  condition.  In the event that the Force  Majeure  condition
continues for more than sixty (60) days,  SCEA may terminate  this Agreement for
cause by providing written notice to Publisher to such effect.

     16.4 No Agency, Partnership or Joint Venture. The relationship between SCEA
and Publisher,  respectively, is that of licensor and licensee. Both parties are
independent  contractors  and are not the  legal  representative,  agent,  joint
venturer,  partner or employee  of the other  party for any purpose  whatsoever.
Neither party has any right or authority to assume or create any  obligations of
any kind or to make any representation or warranty on behalf of the other party,
whether  express  or  implied,  or to  bind  the  other  party  in  any  respect
whatsoever.

     16.5  Assignment.  SCEA has  entered  into this  Agreement  based  upon the
particular  reputation,   capabilities  and  experience  of  Publisher  and  its
officers,  directors and employees.  Accordingly,  Publisher may not assign this
Agreement or any of its rights hereunder, nor delegate or otherwise transfer any
of its  obligations  hereunder,  to any third  party  unless  the prior  written
consent of SCEA shall first be obtained. This Agreement shall not be assigned in
contravention  of Section 14.2 (iii).  Any  attempted  or purported  assignment,
delegation or other such transfer, directly or indirectly,  without the required
consent of SCEA shall be void.  Subject to the foregoing,  this Agreement  shall
inure  to the  benefit  of the  parties  and  their  respective  successors  and
permitted  assigns  (other than under the  conditions  set forth in Section 14.2
(iii).  SCEA  shall  have the  right to  assign  any and all of its  rights  and
obligations hereunder to any Sony affiliate(s).

     16.6   Subcontractors.   Publisher  shall  not  sell,   assign,   delegate,
subcontract,  sublicense or otherwise transfer or encumber all or any portion of
the  licenses  herein  granted  without  the  prior  written  approval  of SCEA,
provided,  however,  that Publisher may retain those  subcontractors who provide
services which do not require  access to Sony  Materials or SCEA's  Confidential
Information   without   such  prior   approval.   Publisher   may  retain  those
subcontractor(s)  to assist with the  development,  publication and marketing of
Licensed Products (or portions thereof) which have signed (i) an LPA or LDA with
SCEA (the  "PlayStation  2 Agreement")  in full force and effect  throughout the
term of such development and marketing;  or (ii) an SCEA-approved  subcontractor
agreement ("Subcontractor  Agreement"); and SCEA has approved such subcontractor
in  writing,   which  approval  shall  be  in  SCEA's  sole   discretion.   Such
Subcontractor  Agreement shall provide that SCEA is a third-party beneficiary of
such Subcontractor Agreement and has the full right to bring any actions against
such  subcontractors  to comply in all respects with the terms and conditions of
this  Agreement.  Publisher  shall  provide  a copy  of any  such  Subcontractor
Agreement to SCEA prior to and following execution thereof.  Publisher shall not
disclose to any subcontractor any of SCEA's Confidential Information, including,
without limitation, any Sony Materials,  unless and until either a PlayStation 2
Agreement or a  Subcontractor  Agreement has been executed and approved by SCEA.
Notwithstanding any consent which may be granted by SCEA for Publisher to employ
any such permitted subcontractor(s),  or any such separate agreement(s) that may
be entered into by Publisher  with any such permitted  subcontractor,  Publisher
shall remain fully liable for its compliance  with all of the provisions of this
Agreement and for the  compliance of any and all permitted  subcontractors  with
the  provisions  of any  agreements  entered  into  by  such  subcontractors  in
accordance with this Section.  Publisher shall use its best efforts to cause its
subcontractors  retained  in  furtherance  of this  Agreement  to  comply in all
respects  with  the  terms  and  conditions  of  this   Agreement,   and  hereby
unconditionally  guarantees  all  obligations  of its  subcontractors.  SCEA may
subcontract any of its rights or obligations hereunder.

     16.7 Compliance with Applicable Laws. The parties shall at all times comply
with all applicable  regulations  and orders of their  respective  countries and
other controlling  jurisdictions and all conventions and treaties to which their
countries are a party or relating to or in any way affecting  this Agreement and
the  performance  by the  parties  of this  Agreement.  Each  party,  at its own
expense, shall negotiate and obtain any approval,  license or permit required in
the performance of its obligations, and shall declare, record or take such steps
to render this Agreement binding,  including,  without limitation, the recording
of this Agreement with any appropriate governmental authorities (if required).

     16.8  Governing  Law;  Consent to  Jurisdiction.  This  Agreement  shall be
governed  by and  interpreted  in  accordance  with  the  laws of the  State  of
California,  excluding  that body of law  related to choice of laws,  and of the
United States of America.  Any action or proceeding brought to enforce the terms
of this  Agreement  or to  adjudicate  any dispute  arising  hereunder  shall be
brought in the Superior Court of the County of San Mateo, State of California or
the United States District Court for the Northern  District of California.  Each
of the parties hereby submits itself to the exclusive  jurisdiction and venue of
such  courts for  purposes  of any such  action and agrees  that

                                       23
<PAGE>

                                                                    CONFIDENTIAL

any  service of process may be effected by delivery of the summons in the manner
provided  in the  delivery  of  notices  set forth in  Section  16.1  above.  In
addition,  each party  hereby  waives the right to a jury trial in any action or
proceeding related to this Agreement.

     16.9 Legal  Costs and  Expenses.  In the event it is  necessary  for either
party to retain the services of an attorney or attorneys to enforce the terms of
this  Agreement or to file or defend any action  arising out of this  Agreement,
then the prevailing  party in any such action shall be entitled,  in addition to
any other  rights and  remedies  available  to it at law or in equity to recover
from the other party its  reasonable  fees for attorneys  and expert  witnesses,
plus such court  costs and  expenses  as may be fixed by any court of  competent
jurisdiction. The term "prevailing party" for the purposes of this Section shall
include a defendant  who has by motion,  judgment,  verdict or  dismissal by the
court,  successfully  defended  against any claim that has been asserted against
it.

     16.10 Remedies.  Unless expressly set forth to the contrary, either party's
election of any remedies  provided for in this Agreement  shall not be exclusive
of any other  remedies,  and all such remedies shall be deemed to be cumulative.
Any breach of  Sections 3, 4, 5, 6.1,  11 and 13 of this  Agreement  would cause
significant and irreparable harm to SCEA, the extent of which would be difficult
to ascertain.  Accordingly,  in addition to any other remedies including without
limitation  equitable  relief to which SCEA may be  entitled,  in the event of a
breach by Publisher or any of its employees or permitted  subcontractors  of any
such  Sections  of this  Agreement,  SCEA  shall be  entitled  to the  immediate
issuance  without bond of ex parte  injunctive  relief or, if a bond is required
under  applicable  law, on the posting of a bond in an amount not to exceed [*],
enjoining any breach or threatened  breach of any or all of such provisions.  In
addition,  if Publisher fails to comply with any of its obligations as set forth
herein,  SCEA shall be entitled to an  accounting  and repayment of all forms of
compensation,  commissions, remuneration or benefits which Publisher directly or
indirectly  realizes  as a result  of or  arising  in  connection  with any such
failure to comply.  Such remedy shall be in addition to and not in limitation of
any injunctive relief or other remedies to which SCEA may be entitled under this
Agreement  or  otherwise  at law or in  equity.  In  addition,  Publisher  shall
indemnify  SCEA  for  all  losses,  damages,  liabilities,  costs  and  expenses
(including  reasonable  attorneys' fees and all reasonable  related costs) which
SCEA may sustain or incur as a result of any breach under this Agreement.

     16.11  Severability.  In the event that any provision of this Agreement (or
portion  thereof)  is  determined  by a court of  competent  jurisdiction  to be
invalid or otherwise unenforceable, such provision (or portion thereof) shall be
enforced to the extent  possible  consistent  with the stated  intention  of the
parties,  or, if  incapable of such  enforcement,  shall be deemed to be deleted
from this  Agreement,  while the remainder of this  Agreement  shall continue in
full force and remain in effect according to its stated terms and conditions.

     16.12 Sections Surviving Expiration or Termination.  The following sections
shall survive the  expiration or earlier  termination  of this Agreement for any
reason: 4, 5.8, 6.2, 6.4, 8, 9, 10, 11, 13, 14.5, 15, and 16.

     16.13 Waiver.  No failure or delay by either party in exercising any right,
power or remedy  under  this  Agreement  shall  operate  as a waiver of any such
right,  power or remedy.  No waiver of any provision of this Agreement  shall be
effective  unless in writing and signed by the party against whom such waiver is
sought to be  enforced.  Any  waiver by either  party of any  provision  of this
Agreement  shall not be  construed  as a waiver of any other  provision  of this
Agreement,  nor shall such waiver  operate or be  construed  as a waiver of such
provision respecting any future event or circumstance.

     16.14  Modification  and  Amendment.  No  modification  or amendment of any
provision of this Agreement  shall be effective  unless in writing and signed by
both of the parties.  Notwithstanding the foregoing,  SCEA reserves the right to
modify the SourceBook 2 from time to time upon reasonable notice to Publisher.

     16.15  Headings.  The section  headings used in this Agreement are intended
primarily for reference and shall not by themselves  determine the  construction
or interpretation of this Agreement or any portion hereof.

     16.16  Integration.   This  Agreement,  together  with  the  SourceBook  2,
constitutes the entire  agreement  between SCEA and Publisher and supersedes all
prior   or   contemporaneous   agreements,    proposals,    understandings   and
communications between SCEA and Publisher, whether oral or written, with respect
to the subject matter hereof  including any  PlayStation 2  Confidentiality  and
Nondisclosure Agreement and Materials Loan Agreement between SCEA and Publisher.

     16.17 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original,  and together  shall  constitute  one and the
same instrument.

     16.18   Construction.   This  Agreement  shall  be  fairly  interpreted  in
accordance  with its terms and  without any strict  construction  in favor of or
against either of the parties..

-------------------
*    Confidential portion omitted and filed separately with the Commission.

                                       24
<PAGE>

                                                                    CONFIDENTIAL

IN WITNESS  WHEREOF,  the parties have caused this Agreement to be duly executed
as of the day and year first written above.

SONY COMPUTER ENTERTAINMENT AMERICA           THE 3DO COMPANY
INC.

By: /S/ Phil Harrison                         By: /S/ James Alan Cook
  ------------------------------------            ------------------------------

Print Name: Phil Harrison                     Print Name: James Alan Cook
            --------------------------                    ----------------------

Title: Vice President                         Title: Executive Vice President
       -------------------------------               ---------------------------

Date: 4/10/2000                               Date: April 7, 2000
      --------------------------------              ----------------------------

NOT AN AGREEMENT UNTIL
EXECUTED BY BOTH PARTIES

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]