Document:

Exhibit 10.23

 

DITECH COMMUNICATIONS CORPORATION

 

 

February 3, 2006

 

Gary D. Testa

 

Subject: Employment Offer

 

Dear Gary,

 

I am pleased to offer you
employment with Ditech Communications Corporation as Vice President, Worldwide
Sales reporting directly to me.   This
offer is contingent upon the approval of Ditech’s Board of Directors and
Compensation Committee, as you will be an executive officer of Ditech.  The terms and conditions of this offer are
described below.

 

A.  Compensation:

 

Your compensation package
consists of the following:

 

1.
Base Salary:  Base salary of $18,333 per
month, equivalent to $220,000 annualized, less standard payroll deductions and
withholdings.

 

2.
Commissions:  Commencing May 1st,
2006 you will be eligible for commissions under the terms of the Ditech
Commission Plan.  Under this plan, you will be eligible
to earn commissions of $180,000 at 100% attainment of the corporate 2007 fiscal
year shipping plan (“the Shipping Plan”). 
In addition you will be paid an additional commission equal to 1% of
shipments in excess of the Shipping Plan. 
The Shipping Plan for fiscal 2007 will be established prior to April 30th,
2006 and you will be involved in the decision making process for establishing
this Plan which shall come into effect on May 1, 2006.

 

a)  From the
commencement of your employment until April 30th, 2006, you
will receive a bonus equal to $15,000 per month on a pro-rata basis.

 

b)  For the
period starting May 1st, 2006 until the conclusion of your initial twelve
(12) months of employment, provided you remain employed by Ditech during such
period, you will be paid the greater of either commissions earned or a
non-recoverable advance equal to $11,667 per month ($140,000 annualized).

 

c)  Commission,
bonus, and advance payments for the periods shall be paid 30 days after the
month in which they are applicable, in the last payroll of the month, less
standard payroll deductions and withholdings.

 

3.              Stock Options:

 

Subject
to the approval of Ditech’s Compensation Committee, you will be granted a
nonqualified stock option to purchase 200,000 shares of Ditech’s Common Stock
(the “First Option”) and a nonqualified stock option to purchase 100,000 shares
of

 

 

Ditech’s Common Stock (the “Second Option”).
The exercise price per share for each option will be equal to the fair market
value per share on the date of the option grant.  The options will be subject to the terms and
conditions applicable to options granted under Ditech’s 2005 New Recruit
Stock Plan as described in that plan and the applicable stock option
agreement.

 

a)                                      The
First Option will vest as to 25% of the option shares after 12 months of
continuous service; the balance will vest in monthly installments of 1/48th
over the next 36 months of continuous service. The normal exercise period for
stock options pursuant to the plan is 90 days from date of termination.

 

b)                                     The
Second Option will vest as to 25% of the option shares after 24 months of
continuous service; the balance will vest in monthly installments of 1/48th
over the next 36 months of continuous service. 
The normal exercise period for stock options pursuant to the plan is 90
days from date of termination.

 

4.              Annual Compensation Review:

 

Executive
cash compensation is generally reviewed at the beginning of our fiscal year, May 1st.  Your next
compensation review will be May 2007.

 

B.              At Will Employment:

 

The
Company will employ you on an “at will” basis, which means that either you or
Ditech may terminate your employment at any time, with or without cause or
advance notice.

 

C.              Severance Payments Upon Covered Termination or Constructive Termination During
First Year of Employment:

 

If you
incur a “Covered Termination” or “Constructive Termination” (as defined in the
Appendix to this offer letter) during your first year of employment, you will
receive the following severance benefits of your employment termination:

 

1. Salary and Commission Wages:

 

Ditech
shall pay your base salary plus the bonus and non-recoverable commission
advance payments described in paragraph A.2.a & b above for:  (i) six months from your receipt of
Ditech’s written notification of intent to separate, or (ii) until your
one year anniversary of employment, whichever is longer.  Such severance payment will be paid in a lump
sum within 10 days of the effective date of the separation release referred to
in Paragraph E below.

 

2

 

2.  Acceleration of Stock Option
Vesting:

 

(i) the vesting of a
number of the shares subject to your First Option will be accelerated, and
shall be deemed vested and exercisable as of your termination date, as shall
equal the greater of (x) 50,000 shares or (y) the number of shares that would
have vested if you had remained employed with Ditech for an additional six (6) months
following the date of your termination of employment; and

 

(ii) the vesting of
a number of the shares subject to your Second Option will be accelerated, and
shall be deemed vested and exercisable as of your termination date, as shall
equal 25,000 shares multiplied by the fraction equal to (x – 6)/6 where x is a
number between seven (7) and twelve (12) and is equal to the number of
months, you were employed by Ditech prior to the termination of your
employment.

 

3.  The severance benefits described in this section will
be in lieu of any other severance policy of general application to Company
employees (if any).

 

D.              Severance Benefits Upon Termination Without Cause After First Year of Service:

 

After
your first year of service, you will be entitled to a severance payment upon
termination without Cause or a Covered Termination equal to six months of your
then current salary.  Such severance
payment will be paid in a lump sum within 10 days of the effective date of the
separation release referred to in Paragraph E below.

 

E.                Severance Benefits Conditioned
Upon Execution of General Release:

 

The
foregoing notwithstanding, you will not be entitled to any of the severance
benefits described in Paragraphs C and D, above, unless you have executed a
general release (in a form prescribed by Ditech) of all known and unknown
claims that you may then have against Ditech or persons affiliated with Ditech,
and such release shall have become effective. 
The foregoing severance benefits are subject to approval by Ditech’s
Compensation Committee.

 

F.                Health Insurance and Benefits

 

Your
benefit package with Ditech will include Health insurance coverage (with
partial premium due if for family coverage) beginning the first of the month
after date of employment, Life and Long Term Disability insurance with option
for additional coverage, Flexible Spending Program participation, Employee
Stock Purchase Program (ESPP) and 401(k) participation.  Eligibility for 401(k) is effective after 90
days of employment.  Your eligibility for
ESPP participation is subject to the terms of the plan.

 

3

 

G.               Relocation

 

We
will provide you with a relocation bonus of $130,000 to be paid within 18
months from the date of hire, provided that you are still a full time employee
of the Company at that time.  To qualify
for the relocation bonus, you must (a) have moved your primary residence
within 30 miles of Ditech and have initiated the move to this new residence
within 12 months of your hire date and (b) be completed with the move to a purchased residence
within 30 miles of Ditech’s current headquarters within 18 months of your hire
date.  The relocation bonus will be paid
upon completion of the move and with evidence of the home purchase as a primary
residence for you and your family.  Any
tax implications will be your responsibility. 
Please consult your tax advisor regarding relocation taxes.

 

H.              At-will Employment

 

Your
employment with Ditech Communications Corporation is at-will.  This at-will provision is only subject to
change in a writing signed by the CEO of Ditech.  You will be asked to sign the statement of
your acceptance and a confidentiality agreement when you report to work.

 

This offer letter
constitutes the entire terms of the offer of employment with the Company, and
supersedes all prior negotiations and agreements, whether written or oral,
relating to the subject matter of the offer. 
No modifications to this agreement shall be effective unless contained
in a written document for that express purpose, signed by you and the CEO or
other authorized officer of Ditech.

 

By signing this letter,
you and Ditech Communications Corporation, agree to submit to mandatory and
exclusive binding arbitration any controversy or claim arising out of or
relating to this matter, or any breach hereof or your employment relationship,
provided, however, that the parties retain their right to and shall not be
prohibited, limited or in any way restricted from, seeking or obtaining
injunctive relief from a court having jurisdiction over the parties.  Such arbitration shall be conducted through
JAMS in the State of California, Santa Clara County, before a single
arbitrator, in accordance with the JAMS rules in effect at that time.  The arbitrator must decide all disputes in
accordance with California Law and shall have power to decide all matters,
including arbitrability.  The arbitrator
shall allow discovery to enable each of us to present our cases.  The arbitrator shall issue a written decision
that contains the essential findings and conclusions on which the decision is
based.  You shall bear only those costs
of arbitration you would otherwise bear had you brought a claim covered by this
Agreement in court.  Judgment upon the
determination of award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.  We each
understand and agree that we are waiving a trial by jury.

 

4

 

Gary, I acknowledge the
rather legalistic nature of much of this offer letter; however, it is to all of
our benefit to get all of this down on paper. 
With that said, I do look forward to working with you and having you as
a part of our valuable and dynamic team! 
Please indicate your acceptance by signing and returning this letter on or
before February 9,
2006.  You may fax your acceptance to
(650) 564-9690.  We would like your employment to
commence as soon as possible with you
assuming your full responsibilities.
 We anticipate your full time
start date to begin on or before February 8, 2006.

 

 

Sincerely,

 

 

	
    /s/
  Timothy K. Montgomery

  	
   

  	
   

  	
    3
  Feb. ‘06

  	
   

  
	
  Timothy K.
  Montgomery

  	
   

  	
  Date

  	
   

  
	
  President,
  CEO & Chairman of the Board

  	
   

  	
   

  

 

 

Accepted by:

 

 

	
    /s/
  Gary Testa

  	
   

  	
   

  	
  4 Feb. 2006

  	
   

  
	
  Gary Testa

  	
   

  	
  Date

  	
   

  

 

5

 

Appendix

to

Offer of Employment

 

Definitions

 

“Covered Termination”
shall mean:

 

(a)                                  Ditech
terminates your employment for any reason other than “Cause,” as defined below; or

 

(b)                                 if there is a “Change in Control,” as defined below, and you are not offered a position with Ditech
or the acquiring company with substantially the equivalent compensation and
duties; or

 

(c)           if there is a “Change in Control” and:

 

(i)                         you are not offered employment with materially the
equivalent compensation, duties, and conditions, as compared to your condition
prior to the Change in Control and
decide to terminate your employment at such time; or

 

(ii)                      you
accept a position with materially the equivalent compensation, duties, and
conditions, as compared to your condition prior to the Change in Control, but within six (6) months of
such acceptance, your employment with Ditech or the
acquiring company is terminated by Ditech or the acquiring company other than
for “Cause;” or

 

(d)           you resign your employment due to a “Constructive
Termination” as defined below.

 

“Cause” shall mean that
you have committed, or there has occurred, one or more of the following:  (a) conviction
of, a guilty plea with respect to, or a plea of nolo
contendere to a charge that you have committed a crime under the
laws of the United States or of any state involving moral turpitude or deceit,
including, but not limited to, fraud, theft, embezzlement or any crime that
results in or is intended to result in personal enrichment at the expense of
Ditech; (b) material breach of any agreement entered into between you and
Ditech that is not remedied by you within thirty (30) days of written notice of
such breach from Ditech (provided that if such breach cannot be reasonably remedied,
then no such notice or cure period shall apply); (c) gross misconduct,
violation of written, published Ditech policies, or neglect by you of your
duties, if such conduct is not cured within seven (7) days of your receipt
of written notice (provided that such conduct can reasonably be cured, and if
such conduct cannot reasonably be cured, then such notice and cure period shall
not apply); (d) engagement in any intentional activity that violates your
confidentiality and proprietary rights agreements with Ditech, if such conduct
is not cured within seven (7) days of your receipt of written notice
(provided that such conduct can reasonably be cured, and if such conduct cannot
reasonably be cured, then such notice and cure period shall not apply).

 

6

 

“Constructive Termination”
shall mean any one of the following events which occurs on or after the
commencement of your employment with Ditech without your consent: (i) any
material reduction of your then current annual base salary or benefits, except
to the extent that the annual base salary or benefits of all other officers of
Ditech are similarly reduced; (ii) any material change to your duties,
responsibilities, or authority by Ditech or its successor entity which has not
been agreed to by you in writing, excluding for this purpose an isolated or
inadvertent action not taken in bad faith which is remedied by Ditech or its
successor within thirty (30) days of written notice thereof from you, (iii) in the event that you have initiated the
relocation described in paragraph (G) above and there is the subsequent requirement
that you then relocate to a work site that would increase your one-way commute
distance to your office by more than thirty (30) miles from your principal
residence, or (iv) any material breach by Ditech or its successor of its
obligations to you that is not remedied by Ditech within thirty (30) days of
written notice of such breach from you (provided that if such breach cannot be
reasonably remedied, then no such notice or cure period shall apply).

 

“Change in Control” shall
have the meaning defined for “Change in Control” in the Ditech 2005 New Recruit
Stock Option Plan, as written as of date of this offer and incorporated into
this offer hereto by reference.

 

“Continuous Service” shall
have the meaning defined for “Continuous Service” in the Ditech 2005 New
Recruit Stock Option Plan, as written as of date of this offer and incorporated
into this offer hereto by reference.

 

7Exhibit 10.1

 

CONTRACT NO.
149238

 

XBOX 360 PUBLISHER LICENSE AGREEMENT

 

This Xbox 360 Publisher License
Agreement (“Agreement”) is entered into and effective as of the later of the
two signature dates below (the “Effective Date”) by and between Microsoft Licensing,
GP, a Nevada general
partnership (“Microsoft”), and THQ Inc., a Delaware corporation (“Publisher”).

 

RECITALS

 

 

A.            Microsoft and its affiliated
companies develop and license a computer game system known as the Xbox 360 game
system and a proprietary online service accessible via the Xbox 360 game system
known as Xbox Live.

B.            Publisher wishes to develop and/or
publish one or more software products running on the Xbox 360 game system,
which software products may also be made available to subscribers of Xbox Live,
and to license proprietary materials from Microsoft on the terms and conditions
set forth herein.

Accordingly, for and in
consideration of the mutual covenants and conditions contained herein, and for
other good and valuable consideration, receipt of which each party hereby
acknowledges, Microsoft and Publisher agree as follows:

1.             Exhibits

The following exhibits are hereby incorporated to this
Agreement (some require completion and/or execution by one or both parties):  

	
  Exhibit 1:

  	
   

  	
  Payments

  
	
  Exhibit 2:

  	
   

  	
  Xbox 360 Royalty
  Tier Selection Form

  
	
  Exhibit 3:

  	
   

  	
  Xbox 360
  Publisher Enrollment Form

  
	
  Exhibit 4:

  	
   

  	
  Authorized Subsidiaries

  
	
  Exhibit 5:

  	
   

  	
  Non-Disclosure
  Agreement

  
	
  Exhibit 6:

  	
   

  	
  Japan/Asian Royalty
  Incentive Program

  
	
  Exhibit 7:

  	
   

  	
  Xbox Live Incentive
  Program

  

2.             Definitions

As further described in this
Agreement and the Xbox 360 Publisher Guide (defined below), the following terms
have the following respective meanings:

2.1           “Asian Manufacturing Region”
means the region for manufacturing comprising Taiwan, Hong Kong, Singapore,
Korea, Japan and any other countries that are included by Microsoft from time
to time as set forth in the Xbox 360 Publisher Guide.

2.2           “Asian Sales Territory”
means the territory for sales distribution comprising Taiwan, Hong Kong,
Singapore, Korea, and any other countries that are included by Microsoft from time to time as set forth
in the Xbox 360 Publisher Guide.  The Asian Sales Territory does not include
Japan.

2.3           “Authorized Replicator”
means a software replicator certified and approved by Microsoft for replication
of FPUs (defined below) that run on the Xbox 360.

2.4            “Branding Specifications”
means the specifications as provided by Microsoft from time to time for using
the Licensed Trademarks in connection with a Software Title and/or Online
Content and on Marketing
Materials as set forth in the Xbox 360 Publisher Guide.

2.5           “BTS” means a
Microsoft designed break-the-seal sticker that will be issued to the Authorized
Replicator for placement on the Packaging Materials (defined below) as
specified in the Xbox 360 Publisher Guide.

2.6           “Certification”
means the final stage of the approval process by which Microsoft approves or
disapproves of a Software Title or Online Content for manufacture and/or distribution.
 Certification is further defined in this
Agreement and the Xbox 360 Publisher Guide.

 

Microsoft
Confidential

 

1

 

2.7           “Commercial  Release” with respect to a Software Title means the first commercial
distribution of an FPU that is not designated as a Demo Version.  With respect to Online Content, Commercial Release means its first
availability via Xbox Live to Xbox Live Users.

2.8           “Concept” means
the detailed description of Publisher’s proposed Software Title and/or Online Content
in each case including such information as may be requested by Microsoft.

2.9           “Demo Versions”
means a small portion of an applicable Software Title that is provided to end users
to advertise or promote a Software Title.

2.10         “European Sales Territory”
means the territory for sales distribution comprising the United
Kingdom, France, Germany, Spain, Italy, Netherlands, Belgium, Sweden, Denmark,
Norway, Finland, Austria, Switzerland, Ireland, Portugal, Greece, Australia,
New Zealand and any other countries that are included by Microsoft from time to
time as set forth in the Xbox 360 Publisher Guide

2.11         “European Manufacturing Region”
means the region for manufacturing comprising the United Kingdom,
France, Germany, Spain, Italy, Netherlands, Belgium, Sweden, Denmark, Norway,
Finland, Austria, Switzerland, Ireland, Portugal, Greece, Australia, New
Zealand and any other countries that are included by Microsoft from time to
time as set forth in the Xbox 360 Publisher Guide.

2.12         “FPU” or “Finished Product Unit” means a copy of a Software Title in
object code form that has passed Certification, has been affixed to a DVD disk and
approved by Microsoft for release and manufacturing.  Once the Packaging Materials have been added,
and the BTS has been assigned or affixed to the FPU or its packaging, the FPU
also includes its accompanying BTS and Packaging Materials.

2.13         “Japan Sales Territory” means
the territory for sales distribution comprising the country of Japan.

2.14         “Licensed Trademarks”
means the Microsoft trademarks identified in the Xbox 360 Publisher
Guide.

2.15         “Marketing  Materials” collectively means the Packaging Materials and all
press releases, marketing, advertising or promotional materials related to the
Software Title, FPUs and/or Online Content (including without limitation Web
advertising and Publisher’s Web pages to the extent they refer to the Software
Title(s), FPU(s) and/or Online Content) that will be used and distributed by Publisher
in the marketing of the Software Title(s), FPU(s) and/or Online Content.

2.16         “Manufacturing Region” means
the Asian Manufacturing Region, European Manufacturing Region, and/or North
American Manufacturing Region.

2.17         “North American Sales
Territory” means the territory for sales distribution comprising the
United States, Canada, Mexico, Colombia and any other countries that may be
included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide.

2.18         “North American
Manufacturing Region” means the region for manufacturing comprising
the United States, Canada, Mexico, Colombia and any other countries that may be
included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide.

2.19         “Online Content”
means any content, feature, or access to software or online service that is distributed
by Microsoft pursuant to this Agreement. 
Online Content includes, but is not limited to, Online Game Features, Title
Updates, Demo Versions, trailers, “themes,” “gamer pictures” or any other
category of online content or service approved by Microsoft from time to time.  Trailers, “themes,” “gamer pictures” and any other approved Online Content will
be further described in the Xbox 360 Publisher Guide.

2.20         “Online Game Features”
means a Software Title’s content, features and/or services that are available
to Xbox Live Users via Xbox Live, whether included in the Software Title’s FPU
or otherwise distributed via Xbox Live.

2.21         “Packaging Materials”
means art and mechanical formats for a Software Title including the retail
packaging, end user instruction manual with end user license agreement and
warranties, end user warnings, FPU media label, and any promotional inserts and
other materials that are to be included in the retail packaging.

 

2

2.22         “Pre-Certification” means
the first stage of the approval process wherein Microsoft tests to provide
feedback and/or identify any issues that may prevent the Software Title from
being approved during the Certification phase. 
Pre-Certification is further described in this Agreement and the Xbox
360 Publisher Guide.

2.23         “Sales Territory” means
the Asian Sales Territory, European Sales Territory, Japan Sales Territory,
and/or North American Sales Territory.

2.24         “Software Title”
means the single software product as approved by Microsoft for use on Xbox 360,
including any Title Updates thereto (if and to the extent approved by
Microsoft) and all Online Game Features for such Software Title.  If Microsoft approves one or more additional
single software product(s) proposed by Publisher to run on Xbox 360, this
Agreement, and the term “Software Title,” will be broadened automatically to
cover the respective new software product(s) as additional Software Title(s)
under this Agreement.

2.25         “Subscriber” means
an Xbox Live User that establishes an account with Xbox Live.

2.26         “Sub-Publisher”
means an entity that has a valid Xbox 360 publisher license agreement with
Microsoft or a Microsoft affiliate and with whom Publisher has entered an
agreement to allow such entity to publish a Software Title or Online Content in
specific Sales Territories.

2.27         “Suggested Retail Price” means
the highest per unit price that Publisher or its agent recommends the FPU be
made commercially available to end-users in a particular Sales Territory.  If the Suggested Retail Price of a particular
Software Title varies among the countries in a single Sales Territory, then the
highest Suggested Retail Price established for any of the countries will be
used to determine the appropriate royalty fees for the entire Sales Territory.

2.28         “Title Update” means
an update, upgrade, or technical fix to a Software Title that Xbox Live Users
can automatically download to the Xbox Live User’s Xbox 360.

2.29          “Wholesale Price” means
the highest per unit price that Publisher charges retailers and/or distributors
in bona fide third party transactions for the right to distribute and sell  the Software Title within a Sales Territory,
it being agreed that (i) any transactions involving affiliates of Publisher (entities
controlling, controlled by or under common control of, Publisher) are not to be
considered in determining the Wholesale Price; (ii) if Publisher enters into an
agreement with a third party (such as  a
Sub-Publisher) providing the third party with the exclusive right to distribute
the Software Title in a Sales Territory, the Wholesale Price is governed by the
price charged by the third party rather than the terms of the exclusive
distribution agreement between Publisher and such third party; and (iii) if the
Wholesale Price varies among countries in a single Sales Territory, the highest
Wholesale Price used in the Sales Territory will be used to determine the appropriate
royalty fees for the entire
Sales Territory.

2.30         “Xbox 360” means
the second version of Microsoft’s proprietary game system, successor to the
Xbox game system, including operating system software and hardware design
specifications.

2.31         “Xbox 360 Publisher Guide”
means a document (in physical, electronic or Web site form) created by Microsoft
that supplements this Agreement and provides detailed requirements regarding
the Pre-Certification and Certification approval process, Branding
Specifications, replication requirements, royalty payment process, marketing
guidelines, technical specifications and certification requirements, Demo
Version requirements, packaging requirements and other operational aspects of
the Xbox 360 and Xbox Live.  Microsoft
may supplement, revise or update the Xbox 360 Publisher Guide from time to time in its reasonable
discretion as set forth in this Agreement.

2.32         “Xbox Live”
means the proprietary online service offered by Microsoft to Xbox Live Users.

2.33         “Xbox Live User”
means any individual that accesses and uses Xbox Live.

2.34         Other Terms.  All other capitalized
terms have the definitions set forth with the first use of such term as described
in this Agreement.

3.             Xbox 360 Development Kit License

Publisher shall enter
into one or more development kit license(s) for the applicable territory(ies)
to which Xbox 360 game development kits will be shipped for use by Publisher (each
an “XDK License”) pursuant to which Microsoft or its affiliate may license to Publisher
software development tools and hardware to assist Publisher in the development and
testing of 

3

Software Titles, including redistributable code that Publisher
must incorporate into Software Titles pursuant to the terms and conditions
contained in the XDK License.

4.             Approval Process

4.1           Standard
Approval Process.  The standard approval
process for a Software Title is divided into four phases comprised of Concept
approval, Pre-Certification, Certification, and Marketing Materials
approval.  Unless Publisher elects the EU
Approval Option for a European FPU (described below), Publisher is required to
submit its Software Title to Microsoft for evaluation at all four phases.  Each phase is identified below and further described in the Xbox 360 Publisher Guide.  Additional or alternate approval processes for Online Content may be further
described in the Xbox 360 Publisher Guide. 
With respect to any and all approvals required by Microsoft hereunder,
Microsoft shall exercise reasonable discretion and shall act in good faith.

4.1.1        Concept. 
For each Software Title, Publisher shall deliver to Microsoft a
completed Concept submission form (in the form provided by Microsoft to Publisher)
that describes the Software Title.  In
the event that Publisher desires to host or have a third party host or provide
to Xbox Live Users any of Publisher’s Online Game Features, Publisher shall so
indicate on the Concept submission form and must execute an addendum to this
Agreement, which addendum is available upon request and will be incorporated
into this Agreement upon execution.  Following
evaluation of Publisher’s Concept submission, Microsoft will notify Publisher in
writing of whether the Concept is approved or rejected.  If approved, the Concept submission form, in
the form submitted and approved by Microsoft, is incorporated herein by
reference and adherence to its terms is a requirement for Certification.  Publisher may propose Online Content at any
time after a Concept has been approved, in which case Publisher shall deliver
to Microsoft a separate Concept submission for each proposed piece of Online Content.

4.1.2        Pre-Certification. 
If the Concept is approved, Publisher shall deliver to Microsoft a code-complete
version of the Software Title or Online Content that includes all current
features of the Software Title and such other content as may be required under
the Xbox 360 Publisher Guide.  Upon
receipt, Microsoft shall conduct technical screen and/or other testing of the
Software Title or Online Content consistent with the Xbox 360 Publisher Guide
and will subsequently provide Publisher with written advisory feedback regarding
such testing.

4.1.3        Certification.  Following
Pre-Certification, Publisher shall deliver to Microsoft the proposed final
release version of the applicable Software Title that is complete, ready for
access via Xbox Live (if applicable), release, manufacture, and commercial
distribution.  Such version must include the
final content rating certification required by Section 4.4, have identified
program errors corrected, and have any and all changes previously required by
Microsoft implemented.  Microsoft shall
conduct compliance, compatibility, functional and other testing consistent with
the Xbox 360 Publisher Guide (“Certification Testing”) and shall subsequently
provide Publisher with the results of such testing, including any required
fixes required prior to achieving Certification, in writing.  Release from Certification for a Software
Title (and for Online Content as applicable) is based on (1) passing the
Certification Testing; (2) conformance with the approved Concept and any
required submission materials as stated in the Xbox 360 Publisher Guide;
(3) Packaging Materials approval; (4) consistency with the goals and
objectives of the Xbox 360 console platform and Xbox Live; and (5) continuing
and ongoing compliance with all Certification requirements and other
requirements as set forth in the Xbox 360 Publisher Guide and this Agreement.

4.1.4        Marketing Materials Approval.  Publisher shall submit all Marketing Materials
to Microsoft and shall not distribute such Marketing Materials unless and until Microsoft has approved them
in writing.  Prior to use or publication
of any Marketing Materials, Publisher
agrees to incorporate all changes relating to use of the Licensed Trademarks
that Microsoft may request in writing and will use its commercially reasonable
efforts to incorporate other changes reasonably suggested by Microsoft
(provided, however, that in any event Publisher shall at all times comply with
the Branding Specifications).

4.2           EU Approval Option.  For a Software Title that Publisher intends
to distribute solely in the European Sales Territory (a “European FPU”), Publisher
may choose to forego Concept approval (Section 4.1.1), Pre-Certification (Section
4.1.2) and/or Marketing Materials approval (Section 4.1.4) and submit such Software
Title to Microsoft only for Certification approval.  This option is referred to herein as the “EU
Approval Option.”  The EU Approval
Option applies solely to distribution of European FPUs, and is not available
for Online Content intended to be available in the European Sales Territory.   If Publisher chooses the EU Approval
Option, Publisher shall not use the Licensed Trademarks on the European FPU and
the license grant set forth in Section 12.1 is withdrawn as to such European
FPU.  In addition, Publisher shall make
no statements in advertising, marketing materials, packaging, Web sites or
otherwise that the European FPU is approved or otherwise sanctioned by
Microsoft or is an official Xbox 360 Software Title.  The European FPU may not be 

 

4

distributed
outside the European Sales Territory without complying with all terms of this
Agreement concerning approvals and the release of the FPU as deemed relevant by
Microsoft.  Microsoft may provide
additional information in the Xbox 360 Publisher Guide regarding the European
Approval Option.  Notwithstanding Publisher’s
choice of the EU Approval Option, all other portions of this Agreement other
than those specifically identified above shall remain in effect.

4.3           Resubmissions and
Additional
Review.  If
a Software Title or Online Content fails Certification, and if Publisher has
made good faith efforts to address any issues raised by Microsoft, Microsoft
will give Publisher the opportunity to resubmit such Software Title or Online
Content for Certification.  Microsoft may
charge Publisher a reasonable fee designed to offset the costs associated with
testing upon resubmission.  Publisher may request the ability to submit
versions of the Software Title or Online Content at stages of development other
than as identified above for review and feedback by Microsoft.  Such review is within the discretion of
Microsoft and may require the payment of reasonable fees by Publisher to offset
the costs associated with the review of such Software Titles or Online
Content.

4.4           Content
Rating.  For those Sales Territories
that utilize a content rating system, Microsoft will not accept submission of a
Software Title for Certification approval unless and until Publisher has obtained,
at Publisher’s sole cost, a rating not higher than “Mature (17+)” or its
equivalent from the appropriate rating bodies and/or any and all other
independent content rating authority/authorities for the applicable Sales Territory(ies)
reasonably designated by Microsoft (such as ESRB, ELSPA, CERO, etc.).  Publisher
shall include the applicable rating(s) prominently on FPUs and Marketing
Materials, in accordance with the applicable rating body guidelines, and shall
include the applicable rating in a header file of the Software Title and in
Online Content, as described in the Xbox 360 Publisher Guide.  For those Sales Territories that do not
utilize a content rating system, Microsoft will not approve any Software Title
or Online Content that, in its opinion, contains excessive sexual content or
violence, inappropriate language or other elements deemed unsuitable for the Xbox
360. Microsoft will provide THQ advanced notice via the Xbox 360 Publisher
Guide whenever any new countries that do not have a content rating system are
added to Sales Territories and what, if any, content guidelines it proposes for
such country.  If, after Commercial Release,
a Software Title is determined as suitable for adults only or otherwise as
indecent, obscene or otherwise prohibited by law, the Publisher shall at its
own costs recall all FPUs.  Publisher
hereby represents and warrants that any Online Game Features and other
game-related Online Content not included in the initial Software Title FPU will
not be inconsistent with the content rating (or, in those countries that do not
utilize a content rating system, with the overall nature of the content) of the
underlying Software Title.  Content rating
information and requirements may be further described in the Xbox 360 Publisher
Guide.

4.5           Publisher Testing.  Publisher shall
perform its own testing of the Software Title and FPUs and shall keep written
or electronic records of such testing during the term of this Agreement and for
no less than **** thereafter (“Test Records”)   Upon Microsoft’s reasonable
advance written request, Publisher shall provide Microsoft with copies of, or
reasonable access to inspect, the Test Records, FPUs and Software Title (either
in pre-Commercial Release or Commercial Release versions, as Microsoft may
request in writing).

4.6           Mutual Approval Required.  Publisher shall not distribute the Software
Title, nor manufacture any FPU intended for distribution, unless and until
Microsoft has given its final approval and release from Certification version
of the Software Title and both parties have approved the FPU in writing.

4.7           Title Updates

4.7.1        All Title Updates for Software Titles
are subject to approval by Microsoft.  Publisher
may release one Title Update per Software Title free of charge.  Any additional Title Updates proposed by
Publisher may be subject to a reasonable charge.

4.7.2        Microsoft may require Publisher to
develop and provide a Title Update if (a) a Software Title or Online Content adversely
affects Xbox Live, (b) if a change to the Xbox 360 Publisher Guide requires a Title
Update, (c) if Certification is revoked for Online Content, or (d) for any
other reason at Microsoft’s reasonable discretion.  Microsoft will not charge Publisher for the
Certification, hosting, and distribution of Title Updates to Xbox Live Users
for the first Title Update (if any) per Software Title or Online Content required
by a specific change in the Xbox 360 Publisher Guide or for any other reason at
Microsoft’s reasonable discretion.  Microsoft
reserves the right to charge Publisher a reasonable fee to offset the costs
associated with the Certification, hosting, and distribution of Title Updates
to Xbox Live Users that are required because of revocation of Certification or
a Software Title or Online Content adversely affecting Xbox Live.

 

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

5

5.             Xbox 360 Publisher
Guide

Publisher acknowledges that the Xbox 360 Publisher
Guide is an evolving document and subject to change during the term of this
Agreement.  Publisher agrees to be bound
by all provisions contained in the then-applicable version of the Xbox 360
Publisher Guide. Publisher agrees that upon Publisher’s receipt of notice of
availability of the applicable supplement, revision, or updated version of the Xbox
360 Publisher Guide (which may be via a publisher newsletter or other
electronic notification), Publisher shall be bound by all provisions of the Xbox
360 Publisher Guide as supplemented, revised, or updated.  Publisher’s continued distribution of FPUs
after a notice of supplement, revision or update that is included in the Xbox
360 Publisher Guide or made available to Publisher constitutes Publisher’s
agreement to the then-current Xbox 360 Publisher Guide as supplemented, revised
or updated.  Microsoft will specify in
each such supplement, revision or update a reasonable effective date of each
change if such change is not required to be effective immediately.  Only with respect to a Software Title that has
passed Pre-Certification prior to the applicable revision or update, Publisher
will not be obligated to comply with any changes made to the technical or
content requirements for Software Titles in the Xbox 360 Publisher Guide,
except in circumstances where such change is deemed by Microsoft to be vitally
important to the success of the Xbox 360 platform (e.g. changes due to piracy,
technical failure) or will not add significant expense to the Software Title’s
development.  In addition, changes made
in Branding Specifications or other Marketing Materials requirements will be
effective as to a Software Title that has passed Certification only on a “going
forward” basis (i.e., only to such Marketing
Materials and/or FPUs as are manufactured after Microsoft notifies Publisher of
the change).  Notwithstanding the
foregoing, Publisher shall comply with such changes to the Xbox 360 Publisher
Guide related to Branding Specifications or other Marketing Materials
requirements retroactively if Microsoft agrees to pay for Publisher’s direct,
out-of-pocket expenses necessarily incurred as a result of its retrospective
compliance with the change.

6.             Post-Release
Compliance

6.1           Correction of Bugs or
Errors.   Notwithstanding
Microsoft’s Certification, all Software Titles must remain in compliance with
all Certification requirements and requirements set forth in the Xbox 360
Publisher Guide on a continuing and ongoing basis.  Publisher must make commercially reasonable
efforts to correct any material program bugs or errors in conformance with the Xbox
360 Publisher Guide whenever discovered and Publisher agrees to correct such
material bugs and errors as soon as possible after discovery.  With respect to bugs or errors discovered
after Commercial Release of the applicable Software Title, Publisher will, at
Microsoft’s written request or allowance, correct the bug or error in all FPUs
manufactured after discovery and Microsoft may charge a reasonable amount to cover
the costs of Certifying the Software Title again.

6.2           Online Content; Minimum
Commitment

6.2.1        Publisher agrees that each Online Game Feature
of a Software Title will be made available via Xbox Live for at least ****
following the respective Commercial Release of the FPUs of the Software Title
in each Sales Territory in which Xbox Live is available (the “Minimum
Commitment”).  Publisher shall use
commercially reasonable efforts to provide all necessary support for such
Online Game Feature during its availability and for **** after discontinuation in
accordance with Publisher’s standard support services.  Following the Minimum Commitment period,
Publisher may terminate Microsoft’s license associated with such Online Game Feature
upon **** prior written notice to Microsoft; and/or Microsoft may discontinue
the availability of any or all such Online Game Feature via Xbox Live upon ****
prior written notice to Publisher. 
Publisher is responsible for communicating the duration of Online Game Feature
availability to Xbox Live Users, and for providing reasonable advance notice to
Xbox Live Users of any discontinuation of such Online Game Feature.

6.2.2        Subject to Section 10.3, Publisher
agrees that Microsoft has the right to make Online Content other than Online
Games Features submitted by Publisher available to Xbox Live Users for the Term
of this Agreement.  Publisher agrees to
provide all necessary support for such Online Content as long as such Online
Content is made available to Xbox Live Users and for **** thereafter in
accordance with Publisher’s standard support services.

6.2.3        Archive Copies.  Publisher agrees to maintain, and
to possess the ability to support, copies in object code, source code and
symbol format, of all Online Content available to Xbox Live Users during the term
of this Agreement and for no less than **** thereafter.

 

 

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

6

7.             Manufacturing

7.1           Authorized Replicators.
 Publisher will use only an Authorized
Replicator to produce FPUs.  Prior to
placing an order with a replicator for FPUs, Publisher shall confirm with
Microsoft that such entity is an Authorized Replicator.  Microsoft will endeavor to keep an up-to-date
list of Authorized Replicators in the Xbox 360 Publisher Guide.  Publisher will notify Microsoft in writing of
the identity of the applicable Authorized Replicator and the agreement for such
replication services shall be as negotiated by Publisher and the applicable
Authorized Replicator, subject to the requirements in this Agreement.  Publisher acknowledges that Microsoft may
charge the Authorized Replicator fees for rights, services or products
associated with the manufacture of FPUs and that the agreement with the
Authorized Replicator grants Microsoft the right to instruct the Authorized
Replicator to cease the manufacture or FPU and/or prohibit the release of FPU
to Publisher or its agents in the event Publisher is in breach of this Agreement
or any credit arrangement entered into by Microsoft and Publisher or Publisher.  Microsoft does not guarantee any level of
performance by the Authorized Replicators, and Microsoft will have no liability
to Publisher for any Authorized Replicator’s failure to perform its obligations
under any applicable agreement between Microsoft and such Authorized Replicator
and/or between Publisher and such Authorized Replicator.  Microsoft has no responsibility for ensuring
that FPUs are free of all defects.

7.2           Submissions to the
Authorized Replicator.  Microsoft,
and not Publisher, will provide to the applicable Authorized Replicator the
final release version of the Software Title and all specifications required by
Microsoft for the manufacture of the FPUs including, without limitation, the
Security Technology (as defined in Section 7.9 below).  Publisher is responsible for preparing and
delivering to the Authorized Replicator all other items required for
manufacturing FPUs including approved Packaging Materials associated with the FPUs.  Subject
to the approval of Publisher (which approval shall not be unreasonably withheld),
Microsoft has the right to have included in the packaging of FPUs such
promotional materials for Xbox, Xbox 360, Xbox Live, and/or other Xbox or Xbox
360 products or services as Microsoft may determine in its reasonable
discretion.  Microsoft will be
responsible for delivering to the Authorized Replicator all such promotional
materials as it desires to include with FPUs, and, unless otherwise agreed by
the parties, any incremental insertion costs relating to such marketing
materials will be borne by Microsoft.

7.3           Verification Versions.  Publisher shall cause the Authorized
Replicator to create several test versions of each FPU (“Verification
Version(s)”) that will be provided to both Microsoft and Publisher for
evaluation.  Prior to full manufacture of
a FPU by the Authorized Replicator, both Publisher and Microsoft must approve
the applicable Verification Version.  Throughout
the manufacturing process and upon the reasonable written request of Microsoft,
Publisher shall cause the Authorized Replicator to provide additional
Verification Versions of the FPU for evaluation by Microsoft.  Microsoft’s approval is a condition precedent
to manufacture, however Publisher shall grant the final approval and shall work
directly with the Authorized Replicator regarding the production run.  Publisher agrees that all FPUs must be
replicated in conformity with all of the quality standards and manufacturing specifications,
policies and procedures that Microsoft requires of its Authorized Replicators,
and that all Packaging Materials must be approved by Microsoft prior to
packaging.  Publisher shall cause the
Authorized Replicator to include the BTS on each FPU.

7.4           Samples.  For
each Software Title sku, at Publisher’s cost, Publisher shall provide Microsoft
with **** FPUs and accompanying Marketing Materials per Sales Territory in
which the FPU will be released.  Such
units may be used in marketing, as product samples, for customer support,
testing and for archival purposes only and not for resale.  Publisher will not have to pay a royalty fee for
such samples nor will such samples count towards the Unit Discounts under Exhibit
1.

7.5          Minimum Order
Quantities

7.5.1        Within **** after the date on which both
Microsoft and Publisher have authorized the Authorized Replicator to begin
replication of FPUs for distribution to a specified Sales Territory, (receipt
of both approvals is referred to as “Release to Manufacture”), Publisher must
place orders to manufacture the minimum order quantities (“MOQs”) as described
in the Xbox 360 Publisher Guide. 
Microsoft may update and revise the MOQs **** which will be effective starting
the following ****.  Currently, the MOQs
are as follows: 

	
   

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
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  ****

  	
   

  	
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  ****

  

 

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

7

7.5.2        For the purposes of this section, a “Disc”
shall mean an FPU that is signed for use on a certain defined range of Xbox 360
hardware, regardless of the number of languages or product skus contained
thereon.  The MOQs per Software Title are
cumulative per Sales Territory.  For
example, if an FPU is released in both the North American Sales Territory and
the European Sales Territory, the cumulative MOQ per Software Title would be ****.  The MOQ per Software Title and the MOQ per
Disc, however, are not cumulative.  For
example, a single Disc FPU released only in the North America Sales Territory
will have a total minimum order quantity of ****, which would cover the ****
MOQ per Software Title and the **** MOQ per Disc (rather than **** which would
have been the total minimum order quantity if the MOQ per Software Title and
the MOQ per Disc had been cumulative).

7.5.3        If Publisher fails to place orders to
meet any applicable minimum order quantity within **** of Release to
Manufacture, Publisher shall immediately pay Microsoft the applicable royalty fee
for the number of FPUs represented by the difference between the applicable MOQ
and the number of FPUs of the Software Title actually ordered by Publisher.

7.6           Manufacturing Reports.   For
purposes of assisting in the scheduling of manufacturing resources, on a ****
basis, or as otherwise requested by Microsoft in writing in its reasonable
discretion,  Publisher shall provide
Microsoft with forecasts showing manufacturing projections by Sales Territory ****
out for each Software Title.  Such
forecasts shall not be binding.  Publisher
will use commercially reasonable efforts to cause the Authorized Replicator to
deliver to Microsoft true and accurate **** statements of FPUs manufactured in
each ****, on a Software Title-by-Software Title basis and in sufficient detail
to satisfy Microsoft, within ****.  Microsoft
will have reasonable audit rights to examine the records of the Authorized
Replicator regarding the number of FPUs manufactured upon ten (10) days advance
written notice to Publisher; provided, that any representative(s) of Microsoft
conducting such examination shall be required to preserve such records as
strictly confidential and may be required to execute a nondisclosure agreement
in a form reasonably suitable to Publisher and Microsoft.

7.7           New
Authorized Replicator.  If Publisher requests that
Microsoft certify and approve a third party replicator that is not then an
Authorized Replicator, Microsoft will consider such request in good faith.  Publisher acknowledges and agrees that
Microsoft may condition certification and approval of such third party on the
execution of an agreement in a form satisfactory to Microsoft pursuant to which
such third party agrees to strict quality standards, non-disclosure requirements,
license fees for use of Microsoft intellectual property and trade secrets, and
procedures to protect Microsoft’s intellectual property and trade secrets.  Notwithstanding anything contained herein, Publisher
acknowledges that Microsoft is not required to certify, maintain the
certification or approve any particular third party as an Authorized
Replicator, and that the certification and approval process may be
time-consuming.

7.8           Alternate Manufacturing in
Europe.  Publisher may, solely
with respect to FPUs manufactured for distribution in the European Sales
Territory, utilize a different process or company for the combination of a FPU
with Packaging Materials provided that such packaging process incorporates the
BTS and otherwise complies with the Xbox 360 Publisher Guide.   Publisher shall notify Microsoft regarding
its use of such process or company so that the parties may properly coordinate
their activities and approvals.  To the
extent that Microsoft is unable to accommodate such processes or company, Publisher
shall modify its operations to comply with Microsoft’s requirements.

7.9           Security.  Microsoft has the
right to add to the final release version of the Software Title delivered by Publisher
to Microsoft, and to all FPUs, such digital signature technology and other
security technology and copyright management information (collectively, “Security
Technology”) as Microsoft may determine to be necessary, and/or Microsoft may
modify the signature included in any Security Technology included in the Software
Title by Publisher at Microsoft’s discretion. 
Additionally, Microsoft may add Security Technology that prohibits the play
of Software Titles on Xbox 360 units manufactured in a region or country
different from the location of manufacture of the respective FPUs or that have
been modified in any manner not authorized by Microsoft.

7.10         Demo Versions. 
If Publisher wishes to distribute a Demo Version in FPU format,
Publisher must obtain Microsoft’s prior written approval and Microsoft may
charge a reasonable fee to offset costs of the Certification.  Subject to the terms of the Xbox 360
Publisher Guide, such Demo Version(s) may be placed on a single disc, either as a stand-alone or with other
Demo Versions and the price of such units must be **** or its equivalent in
local currency.  Unless separately
addressed in the Xbox 360 Publisher Guide, all rights, obligations and
approvals set forth in this Agreement as applying to Software Titles shall
separately apply to any Demo Version.  ****.  If Publishers wishes to distribute a Demo Versions in an

 

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

 

8

 

online downloadable format,
such downloadable Demo Version shall be distributed via by Microsoft Xbox Live in
accordance with Section 10.3, and such downloadable Demo Version will be
subject to all other terms and policies applicable to Online Content set forth
herein and in the Xbox 360 Publisher Guide.

8.             Payments

The Parties shall
make payments to each other under the terms of Exhibit 1. Microsoft
hereby acknowledges and agrees that Publisher makes no representation or
warranty regarding the amount of sales of the Software Title(s) and/or Online
Content or the amount of royalties to be received in connection therewith.

9.             Marketing, Sales
and Support

9.1           Publisher Responsible.  As between Microsoft and Publisher, Publisher
is solely responsible for the marketing and sales of the Software Title.  Publisher is also solely responsible for
providing technical and all other support relating to the FPUs (including for Xbox
Live Users of Online Content).  Publisher shall provide all
appropriate contact information (including without limitation Publisher’s
address and telephone number, and the applicable individual/group responsible
for customer support), and shall also provide all such information to Microsoft
for posting on http://www.xbox.com, or such successor or related Web site
identified by Microsoft or in Xbox Live. 
Customer support shall at all times conform to the Customer Service
Requirements set forth in the Xbox 360 Publisher Guide and industry standards in
the console game industry.

9.2           Warranty.  Publisher shall provide the original end user
of any FPU a minimum warranty in accordance with local laws and industry
practices.  For example, in the United
States, Publisher shall, as of the Effective Date, provide a minimum **** limited warranty that the FPU
will not be defective or Publisher
will refund the purchase price or provide a replacement FPU at no charge.  Publisher may offer additional warranty
coverage consistent with the traditions and practices of video game console game
publishers within the applicable Sales Territory or as otherwise required by
local law.

9.3           Recall.  Notwithstanding anything to the contrary
contained in this Agreement, if there is a material defect in a Software Title
and/or any FPUs, which defect in the reasonable judgment of Microsoft would
significantly impair the ability of an end user to play such Software Title or FPU
or would adversely affect the gameplay of the Xbox 360 or Xbox Live, Microsoft shall
provide Publisher with written notice thereof and the parties shall work in
good faith to resolve any issues without resorting to a recall. However, if
such issues cannot be resolved by the parties, acting in good faith, within a
commercially reasonable time period under the circumstances, Microsoft may require Publisher to recall FPUs and
undertake prompt repair or replacement of such Software Title and/or FPUs.

9.4           No Bundling with
Unapproved Peripherals, Products or Software.  Except as expressly stated in this section, Publisher
shall not market or distribute a FPU bundled with any other product or service,
nor shall Publisher knowingly permit or assist any third party in such
bundling, without Microsoft’s prior written consent.  Publisher may market or distribute (i) FPU
bundled with a Software Title(s) that has been previously certified and
released by Microsoft for manufacturing; or (ii) FPU bundled with a peripheral
product (e.g. game pads) that has been previously licensed as an “Xbox 360
Licensed Peripheral” by Microsoft, without obtaining the written permission of
Microsoft.  Publisher shall contact
Microsoft in advance to confirm that the peripheral or Software Title to be
bundled has previously been approved by Microsoft pursuant to a valid license,
such confirmation not to be unreasonably withheld or delayed by Microsoft.

9.5           Software Title License.  Publisher grants Microsoft a fully-paid, royalty-free, worldwide,
non-exclusive license (i) to publicly perform the Software Titles at
conventions, events, trade shows, press briefings, public interactive displays
and the like; (ii) to use the title of the Software Title, and screen shots
from the Software Title, in advertising and promotional material relating to
Xbox 360 and related Microsoft products and services, as Microsoft may
reasonably deem appropriate, subject to Publisher’s prior written approval;
(iii) distribute Demo Versions with the Official Xbox Magazine,
as a standalone product with other demo software, subject to Publisher’s prior
written approval; and (iv) distribute Software Title trailers via xbox.com,
subject to Publisher’s prior written approval.    Publisher may also select Online Content
for inclusion in public interactive displays and/or compilation demo discs
published by Microsoft, in which case Publisher grants Microsoft a fully-paid,
royalty-free, worldwide, transferable and sublicenseable only to Microsoft
affiliates, non-exclusive license to broadcast, transmit, distribute, host,
publicly display, reproduce and 
manufacture such selected Online Content as part of public interactive
displays and compilation demo discs, and to distribute and permit end users to
download and store (and, at Publisher’s discretion, to make further copies)
such Online Content via public interactive displays, subject to

 

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

 

9

Publisher’s prior written approval.  The rights granted in the preceding sentence
are in addition to any rights that Microsoft may have for uses of Publisher
Software Titles under the applicable law, such as uses that are “referential,” “fair
use” or “reasonable use.”

10.          Grant
of Distribution License, Limitations

10.1         Distribution License.   Upon Certification of the
Software Title, approval of the Marketing Materials and the FPU test version of
the Software Title by Microsoft, and subject to the terms and conditions
contained within this Agreement, Microsoft grants Publisher (and Publisher’s
authorized affiliates, as set forth in Section 10.8) a non-exclusive,
non-transferable (except to Publisher’s authorized affiliates), license to
distribute FPUs containing 
Redistributable and Sample Code (as defined in the XDK License) and
Security Technology (as defined above) within the Sales Territories approved in the Software Title’s Concept in FPU form to third parties for distribution to end users
and/or directly to end users.  The
license to distribute the FPUs is personal to Publisher and except for
transfers of FPU through normal channels of distribution (e.g. wholesalers,
retailers), absent the written approval of Microsoft (not to be unreasonably
withheld or delayed), Publisher may not sublicense or assign its rights under
this license to other parties.  For the
avoidance of doubt, without the written approval of Microsoft, Publisher may
not sublicense, transfer or assign its right to distribute Software Titles or
FPU to another entity, except for Publisher Affiliates, that will brand,
co-brand or otherwise assume control over such products as a “publisher” as
that concept is typically understood in the console game industry.  Publisher may only grant end users the right
to make personal, non-commercial use of Software Titles and may not grant end
users any of the other rights reserved to a copyright holder under US Copyright
Law, Japanese Copyright Law, or its international equivalent.  Publisher’s license rights do not include any
license, right, power or authority to subject Microsoft’s software or
derivative works thereof or intellectual property associated therewith in whole
or in part to any of the terms of an Excluded License.  “Excluded License”
means any license that requires as a condition of use, modification and/or
distribution of software subject to the Excluded License, that such software or
other software combined and/or distributed with such software be (a) disclosed
or distributed in source code form; (b) licensed for the purpose of making
derivative works; or (c) redistributable at no charge.

10.2         No Distribution Outside
the Sales Territory.  Publisher shall distribute FPUs only in Sales
Territories for which the Software Title has been approved by Microsoft.  Publisher shall not directly or indirectly
export any FPUs from an authorized Sales Territory to an unauthorized territory
nor shall Publisher knowingly permit or assist any third party in doing so, nor
shall Publisher distribute FPUs to any person or entity that it has reason to
believe may re-distribute or sell such FPUs outside authorized Sales Territories.

10.3         Online Features.  In consideration of
the royalty payments as described in Exhibit 1, Publisher grants to
Microsoft (i) a worldwide, transferable and/or sublicensable only to Microsoft
affiliates license to broadcast, transmit, distribute, host, publicly display,
reproduce, and license Online Content for use on Xbox 360s, and (ii) a
worldwide. Transferable to Microsoft affiliates license solely to distribute to
end users and permit end users to download and store Online Content (and, at
Publisher’s discretion, to make further copies).  Publisher agrees that the license grants set
forth in this section applicable to Online Content are exclusive, meaning that
except as expressly permitted under this Agreement, the Xbox 360 Publisher
Guide and/or as agreed by the Parties, Publisher shall not directly or
indirectly permit or enable access to Online Content by any means, methods,
platforms or services other than through Xbox Live, or as otherwise set forth
in this Agreement.  Notwithstanding the
foregoing, this Section 10.3 does not prevent Publisher from making other
platform versions of its Software Titles or Online Content available via other
platform-specific online services.  This
Section 10.3 shall survive expiration or termination of this Agreement solely
to the extent and for the duration necessary to effectuate Section 17.3 below.

10.4         No Reverse Engineering.  Publisher may utilize and study the design,
performance and operation of Xbox 360 or Xbox Live solely for the purposes of
developing the Software Title or Online Content.  Notwithstanding the foregoing, Publisher
shall not, directly or indirectly, reverse engineer or aid or assist in the
reverse engineering of all or any part of Xbox 360 or Xbox Live except and only
to the extent that such activity is expressly permitted by applicable law or in
writing by Microsoft notwithstanding this limitation.  In the event applicable law grants Publisher
the right to reverse engineer the Xbox 360 or Xbox Live notwithstanding this
limitation, Publisher shall provide Microsoft with written notice prior to such
reverse engineering activity, information regarding Publisher’s intended method
of reverse engineering, its purpose and the legal authority for such activity
and shall afford Microsoft a reasonable period of time before initiating such
activity in order to evaluate the activity and/or challenge the reverse
engineering activity with the appropriate legal authorities.  Publisher shall refrain from such reverse
engineering activity until such time as any legal challenge is resolved in
Publisher’s favor.  Reverse engineering
includes, without limitation, decompiling, disassembly, sniffing, peeling
semiconductor components, or otherwise deriving source code.  In addition to any other rights and remedies
that Microsoft may have under the circumstances, Publisher shall be required in
all cases to pay royalties to Microsoft in accordance with 

10

Exhibit 1
with respect to any games or other products that are developed, marketed or
distributed by Publisher, and derived in whole or in part from the reverse
engineering of Xbox 360, Xbox Live or any Microsoft data, code or other
material.

10.5         Reservation of Rights. 
Microsoft reserves all rights not explicitly granted herein.

10.6         Ownership of the Software
Titles.  Except for the
intellectual property supplied by Microsoft to Publisher (including without
limitation the Licensed Trademarks hereunder and the licenses in certain software
and hardware granted by an XDK License), ownership of which is retained by
Microsoft, insofar as Microsoft is concerned, Publisher will own all rights in
and to the Software Titles and Online Content.

10.7         Content.  Nothing contained in this Agreement shall be
deemed to prevent Publisher from developing a game or games for other video
game platforms, where such game or games have a similar audiovisual display,
look, feel, or game elements as found in the Software Title developed by
Publisher under this Agreement; provided, however, that Publisher may not use
any of Microsoft’s intellectual property and/or Confidential Information in
such other game or games without the prior written consent of Microsoft.

10.8         Sub-Publishing.  Notwithstanding Section 10.1, Publisher
may enter into independent agreements with other publishers to distribute Software
Titles in multiple approved Sales Territories (a “Sub-Publishing Relationship”),
so long as:

10.8.1      Publisher provides written notice to Microsoft,
at least **** prior to authorizing a Sub-Publisher to manufacture any Software
Title(s), of the Sub-Publishing relationship, along with (i) a summary of the
scope and nature of the Sub-Publishing relationship including, without
limitation, as between Publisher and Sub-Publisher, (ii) which party will be
responsible for Certification of the Software Title(s) and/or any Online Content,
(iii) a list of the Software Title(s) for which Sub-Publisher has acquired
publishing rights, (iv) the geographic territory(ies) for which such rights
were granted, and (v) the term of Publisher’s agreement with Sub-Publisher; and

10.8.2      The Sub-Publisher has signed an Xbox 360
publisher license agreement (“Xbox 360 PLA”) and both Publisher and Sub-Publisher
are and remain at all times in good standing under each of their respective Xbox
360 PLAs.  Publisher is responsible for
making applicable royalty payments for the FPUs for which it places
manufacturing orders, and Sub-Publisher is responsible for making royalty
payments for the FPUs for which it places manufacturing orders; provided, that
Publisher shall not be liable for any failure by Sub-Publisher to make any such
payment.

10.9         Authorized Affiliates.  If Publisher and an affiliate execute the “Publisher
Affiliate Agreement” provided in Exhibit 4, then Publisher’s authorized affiliate
may exercise the rights granted to Publisher under this Agreement.   The
foregoing shall not apply to any Publisher affiliate which pays or intends to
pay royalties from a European billing address. 
Any such European affiliate shall instead execute an Xbox 360 Publisher
Enrollment with MIOL, a copy of which is attached hereto as Exhibit 3.

11.          Usage Data

Publisher acknowledges that the operation of the Xbox
Live service requires that Microsoft collect and store Xbox Live User usage
data, including, without limitation, Xbox Live User statistics, scores,
ratings, and rankings (collectively, “Xbox Live User Data”), as well as
personally-identifiable Xbox Live User data (e.g., name, email address) (“Personal
Data”).  Microsoft reserves the right, in
its discretion, to use such Xbox Live User Data for any purpose, including
without limitation, posting the Xbox Live User Data on Xbox.com or other
Microsoft Web sites.  Microsoft agrees to
use commercially reasonable efforts to periodically make certain Xbox Live User
Data and Personal Data available to Publisher; provided that Publisher’s use of
such data is in accordance with the then-current Xbox Live Privacy Statement
and such other reasonable restrictions as Microsoft may require.  Without limiting the foregoing, Publisher
agrees that any disclosure of Personal Data to Publisher is only used by Publisher
and may not be shared with any other third parties, and any permitted email
communications with Xbox Live Users includes instructions for opting out of
receiving any further communications from Publisher.

12.          Trademark Rights and Restrictions

12.1         Licensed Trademarks License. 
In each Software Title, FPU, Online Content and on all Marketing
Materials, Publisher shall incorporate the Licensed Trademarks and include
credit and acknowledgement to Microsoft as set forth in the Xbox 360 Publisher
Guide.  Microsoft grants to Publisher a
non-exclusive, non-transferable, personal license to

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

 

11

use the Licensed Trademarks in connection
with Software Titles, FPUs, Online Content and Marketing Materials according to
the Xbox 360 Publisher Guide and other conditions herein, and solely in
connection with marketing, sale, manufacturing and distribution in the approved
Sales Territories or via Xbox Live.

12.2         Limitations.  Publisher is granted no right, and
shall not purport, to permit any third party to use the Licensed Trademarks in
any manner without Microsoft’s prior written consent.  Publisher’s license to use Licensed Trademarks
in connection with the Software Title, FPUs and/or Online Content does not
extend to the merchandising or sale of related or promotional products.

12.3         Branding Specifications. 
Publisher’s use of the Licensed Trademarks (including without limitation
in FPUs, Online Content and Marketing Materials) must comply with the Branding
Specifications set forth in the Xbox 360 Publisher Guide.  Publisher shall not use Licensed Trademarks in
association with any third party trademarks in a manner that might suggest
co-branding or otherwise create potential confusion as to source or sponsorship
of the Software Title, Online Content or FPUs or ownership of the Licensed
Trademarks, unless Microsoft has otherwise approved such use in writing.  Upon notice or other discovery of any
non-conformance with the requirements or prohibitions of this section, Publisher
shall promptly remedy such non-conformance and notify Microsoft of the
non-conformance and remedial steps taken.

12.4         Protection of Licensed
Trademarks.  Publisher shall
assist Microsoft in protecting and maintaining Microsoft’s rights in the
Licensed Trademarks, at Microsoft’s sole expense, including preparation and
execution of documents necessary to register the Licensed Trademarks or record
this Agreement, and giving immediate notice to Microsoft of potential
infringement of the Licensed Trademarks. 
Microsoft shall have the sole right to and in its sole discretion and
expense may, commence, prosecute or defend, and control any action concerning
the Licensed Trademarks, either in its own name or by joining Publisher as a
party thereto (subject to Publisher’s prior written consent).  Publisher shall not during the term of this Agreement
contest the validity of, by act or omission jeopardize, or take any action
inconsistent with, Microsoft’s rights or goodwill in the Licensed Trademarks in
any country, including attempted registration of any Licensed Trademark, or use
or attempted registration of any mark confusingly similar thereto.

12.5         Ownership and Goodwill.  Publisher acknowledges Microsoft’s ownership
of all Licensed Trademarks, and all goodwill associated with the Licensed
Trademarks.  Use of the Licensed
Trademarks shall not create any right, title or interest therein in Publisher’s
favor.  Publisher’s use of the Licensed
Trademarks shall inure solely to the benefit of Microsoft.

13.          Non-Disclosure; Announcements

13.1         Non-Disclosure Agreement.  The information, materials and software
exchanged by the parties hereunder or under an XDK License, including the terms
and conditions hereof and of the XDK License, are subject to the Non-Disclosure
Agreement between the parties attached hereto as Exhibit 5 (the “Non-Disclosure
Agreement”), which is incorporated herein by reference; provided, however, that
for purposes of the foregoing, Section 2(a)(i) of the Non-Disclosure Agreement
shall hereinafter read, “The Receiving Party shall: (i)] Refrain from
disclosing Confidential Information of the Disclosing Party to any third
parties for as long as such remains undisclosed under 1(b) above except as
expressly provided in Sections 2(b) and 2(c) of this [Non-Disclosure]
Agreement.”  In this way, all
Confidential Information provided hereunder or by way of the XDK License in
whatever form (e.g. information, materials, tools and/or software exchanged by
the parties hereunder or under an XDK License), including the terms and
conditions hereof and of the XDK License, unless otherwise specifically stated,
will be protected from disclosure for as long as it remains Confidential.

13.2         Public Announcements.  Neither party shall
issue any such press release or make any such public announcement(s) related to
the subject matter of this Agreement or any XDK License without the express
prior consent of the other party, which consent will not be unreasonably
withheld or delayed.    Nothing contained
in this Section 13.2 will relieve Publisher of any other obligations it may
have under this Agreement, including without limitation its obligations to seek
and obtain Microsoft approval of Marketing
Materials.

13.3         Required Public Filings.  Notwithstanding
Sections 13.1 and 13.2, the parties acknowledge that this Agreement, or
portions thereof, may be required under applicable law to be disclosed, as part
of or an exhibit to a party’s required public disclosure documents.  If either party is advised by its legal
counsel that such disclosure is required, it will notify the other in writing
and the parties will jointly seek confidential treatment of this Agreement to
the maximum extent reasonably possible, in documents approved by both parties
and filed with the applicable governmental or regulatory authorities, and/or
Microsoft will prepare a redacted version of this Agreement for filing.

12

14.          Protection of Proprietary Rights

14.1         Microsoft Intellectual
Property.  If Publisher learns of any
infringement or imitation of the Licensed Trademarks, a Software Title, Online
Content or FPU, or the proprietary rights in or related to any of them, it will
promptly notify Microsoft thereof. 
Microsoft may take such action as it deems advisable for the protection
of its rights in and to such proprietary rights, and Publisher shall, if reasonably
requested by Microsoft in
writing, cooperate in all reasonable respects
therein at Microsoft’s expense.  In no
event, however, shall Microsoft be required to take any action if it deems it
inadvisable to do so.  Microsoft will
have the right to retain all proceeds it may derive from any recovery in
connection with such actions.

14.2         Publisher Intellectual
Property.  If Microsoft learns of any
infringement or imitation of a Software Title, Online Content or FPU, or the
proprietary rights in or related to any of them, it will promptly notify
Publisher thereof in writing. Publisher,
without the express written permission of Microsoft, may bring any action or
proceeding relating to infringement or potential infringement of a Software
Title, Online Content or FPU, to the extent such infringement involves any
proprietary rights of Publisher (provided that Publisher will not have the
right to bring any such action or proceeding involving Microsoft’s intellectual
property), and Microsoft shall, if requested by Publisher in writing,
cooperate in all reasonable respects therein.  Publisher shall make
reasonable efforts to inform Microsoft regarding such actions in a timely
manner.  Publisher will have the right to
retain all proceeds it may derive from any recovery in connection with such
actions.  Publisher agrees to use all
commercially reasonable efforts to protect and enforce its proprietary rights
in the Software Title or Online Content.

14.3         Joint Actions.  Publisher and
Microsoft may agree to jointly pursue cases of infringement involving the
Software Titles or Online Content (since such products will contain
intellectual property owned by each of them). 
Unless the parties otherwise agree, or unless the recovery is expressly
allocated between them by the court (in which case the terms of Sections 14.1
and 14.2 will apply), in the event Publisher and Microsoft jointly prosecute an
infringement lawsuit under this provision, any recovery will be used first to
reimburse Publisher and Microsoft for their respective reasonable attorneys’
fees and expenses, pro rata, and
any remaining recovery shall also be given to Publisher and Microsoft pro rata based upon the fees and expenses incurred in
bringing such action.

15.          Warranties

15.1         Publisher.  Publisher
warrants and represents that:

15.1.1      It has the full power to enter into this
Agreement;

15.1.2      It has obtained and will maintain all
necessary rights and permissions for its and Microsoft’s use of the Software
Title, FPUs, Marketing Materials, Online Content, all information, data, logos,
and software or other materials provided to Microsoft and/or made available to Xbox
Live Users via Xbox Live (excluding those portions that consist of the Licensed
Trademarks, Security Technology and redistributable components of the so-called
“XDK” in the form as delivered to Publisher by Microsoft pursuant to an XDK
License) (collectively, the “Publisher Content”), and that all Publisher
Content complies with all laws and regulations, and does not and will not
infringe upon or misappropriate any third party trade secrets, copyrights,
trademarks, patents, publicity, privacy or other proprietary rights.

15.1.3      It shall comply with all laws, regulations,
industry content rating requirements and administrative orders and requirements
within any applicable Sales Territory relating to the distribution, sale and
marketing of the Software Title, and shall keep in force all necessary licenses,
permits, registrations, approvals and/or exemptions throughout the term of this
Agreement and for so long as it is distributing, selling or marketing the
Software Title in any applicable Sales Territory.

15.1.4      The Software Title, Online Content and/or information, data,
logos and software or other materials provided to Microsoft and /or made
available to Xbox Live Users via Xbox Live, do not and shall not contain any messages, data, images or programs that are,
by law, defamatory, obscene or pornographic, or in any way violate any
applicable laws or industry content rating requirements (including
without limitation laws of privacy)
of the applicable Sales Territory(ies) where the Software Title is marketed
and/or distributed.

15.1.5      The
Online Content shall not harvest or otherwise collect information about Xbox
Live Users, including e-mail addresses, without the Xbox Live Users’ express
consent; and the Online Content shall not link to any unsolicited communication
sent to any third party.

15.2         Microsoft.  Microsoft
warrants and represents that:

 

13

15.2.1       It has the full power
to enter into this Agreement and it has not previously and will not grant any
rights to any third party that are inconsistent with the rights granted to Publisher
herein;

15.3        DISCLAIMER.  EXCEPT AS EXPRESSLY STATED IN THIS SECTION 15, MICROSOFT PROVIDES ALL MATERIALS (INCLUDING WITHOUT LIMITATION THE SECURITY
TECHNOLOGY) AND SERVICES HEREUNDER ON AN “AS IS” BASIS, AND MICROSOFT DISCLAIMS
ALL OTHER WARRANTIES UNDER THE APPLICABLE LAWS OF ANY COUNTRY, EXPRESS OR
IMPLIED, REGARDING THE MATERIALS AND SERVICES IT PROVIDES HEREUNDER, INCLUDING
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
WARRANTY OF FREEDOM FROM COMPUTER VIRUSES. 
WITHOUT LIMITATION, MICROSOFT PROVIDES NO WARRANTY OF NON-INFRINGEMENT.

15.4        EXCLUSION OF INCIDENTAL, CONSEQUENTIAL AND CERTAIN
OTHER DAMAGES.  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL MICROSOFT, ITS AFFILIATES,
LICENSORS OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR
CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER, RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING WITHOUT
LIMITATION, LOST PROFITS OR LOST GOODWILL AND WHETHER BASED ON BREACH OF ANY
EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR
STRICT LIABILITY, REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE COULD HAVE BEEN REASONABLY
FORESEEN.

15.5        LIMITATION OF LIABILITY.
THE MAXIMUM LIABILITY OF MICROSOFT TO PUBLISHER OR
TO ANY THIRD PARTY ARISING OUT OF THIS AGREEMENT WILL BE ****.  FURTHERMORE, UNDER NO CIRCUMSTANCES SHALL
MICROSOFT BE LIABLE TO PUBLISHER FOR ANY DAMAGES WHATSOEVER WITH RESPECT TO ANY
CLAIMS RELATING TO THE SECURITY TECHNOLOGY AND/OR ITS EFFECT ON ANY SOFTWARE
TITLE OR FOR ANY STATEMENTS OR CLAIMS MADE BY PUBLISHER, WHETHER IN PUBLISHER’S
MARKETING MATERIALS OR OTHERWISE, REGARDING THE AVAILABILITY OR OPERATION OF
ANY ONLINE FEATURES.

16.           Indemnity;
Insurance.  A claim for
which indemnity may be sought hereunder is referred to as a “Claim.”

16.1         Mutual Indemnification.  Each party hereby agrees to indemnify,
defend, and hold the other party harmless from any and all third party claims,
demands, costs, liabilities, losses, expenses and damages (including reasonable
attorneys’ fees, costs, and expert witnesses’ fees) arising out of or in
connection with any claim that, taking the claimant’s allegations to be true,
would result in a breach by the indemnifying party of any of its representations,
warranties or covenants set forth in Section 15.

16.2         Additional Publisher
Indemnification Obligation. 
Publisher further agrees to indemnify, defend, and hold Microsoft
harmless from any and all third party claims, demands, costs, liabilities,
losses, expenses and damages (including reasonable attorneys’ fees, costs, and
expert witnesses’ fees) arising out of or in connection with any claim
regarding any Software Title or FPU including without limitation any claim
relating to quality, performance, safety thereof, or arising out of Publisher’s
use of the Licensed Trademarks in breach of this Agreement.

16.3         Notice and Assistance. 
The indemnified party shall: 
(i) provide the indemnifying party reasonably prompt notice in
writing of any Claim and permit the indemnifying party to answer and defend such
Claim through counsel chosen and paid by the indemnifying party; and
(ii) provide information, assistance and authority to help the
indemnifying party defend such Claim. 
The indemnified party may participate in the defense of any Claim at its
own expense.  The indemnifying party will
not be responsible for any settlement made by the indemnified party without the
indemnifying party’s written permission, which will not be unreasonably
withheld or delayed.  In the event the
indemnifying party and the indemnified party agree to settle a Claim, the
indemnified party agrees not to publicize the settlement without first
obtaining the indemnifying party’s written permission.

16.4         Insurance.   Publisher shall maintain sufficient and
appropriate insurance coverage to enable it to meet its obligations under this
Agreement and by law (whether Products Liability, General Liability or some
other type of insurance).  For FPUs
distributed in the Japan Sales Territory, Publisher’s coverage will have
minimum limits of the Japanese yen
equivalent of **** per occurrence, with a deductible of not more than the Japanese yen equivalent of ****.  For
FPUs

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

 

14

distributed in the Asian Sales Territory, Publisher’s
coverage will have minimum limits of **** per occurrence (or its equivalent value in
local currency as of the date of issuance), with a deductible of not more than **** (or its equivalent value in local currency as
of the date of issuance).  For FPUs distributed outside of Japan and the Asian
Sales Territories, Publisher shall
maintain Professional Liability and Errors & Omissions Liability Insurance
(E&O) with policy limits of not less than **** per occurrence (or its
equivalent value in local currency as of the date of issuance), each claim with
a deductible of not

more than **** (or its equivalent value in local
currency as of the date of issuance). 
Such insurance shall include coverage for infringement of any
proprietary right of any third party, including without limitation copyright
and trademark infringement as related to Publisher’s performance under this
Agreement.  The E&O insurance
retroactive coverage date will be no later than ****.  Publisher shall maintain an active policy, or
purchase an extended reporting period providing coverage for claims first made
and reported to the insurance company within **** after ****.  Upon request, Publisher shall deliver to Microsoft proof of
such coverage.  In the event that
Publisher’s proof evidences coverage that Microsoft reasonably determines to be
less than that required to meet Publisher’s obligations created by this
Agreement, then Publisher agrees that it shall promptly acquire such coverage
and notify Microsoft in writing thereof.

17.          Term
and Termination

17.1         Term.  The term of this Agreement shall commence on
the Effective Date and shall continue until ****.  Unless one party gives the other notice of
non-renewal within **** of the end of the then-current term, this Agreement
shall automatically renew for successive **** terms.

17.2         Termination for Breach.  If either party materially fails to perform
or comply with this Agreement or any provision thereof, and fails to remedy the
default within **** after the receipt of written notice to that effect, then
the other party has the right, at its sole option and upon written notice to
the defaulting party, to terminate this Agreement upon written notice; provided
that if Publisher is the party that has materially failed to perform or comply
with this Agreement, then Microsoft has the right, but not the obligation, to
suspend availability of the Online Content during such **** period.  Any notice of default hereunder must be
prominently labeled “NOTICE OF DEFAULT”; provided, however, that if the default
is of Sections 10, 12 or Sections 1 or 2 of Exhibit 1, the Non-Disclosure Agreement, or an XDK
License, then the non-defaulting party may
terminate this Agreement immediately upon written notice, without being obligated
to provide a **** cure period.  The
rights and remedies provided in this section are not exclusive and are in
addition to any other rights and remedies provided by law or this
Agreement.  If the uncured default is
related to a particular Software Title or particular Online Content, then the
party not in default has the right, in its discretion, to terminate this Agreement
its entirety or with respect to the applicable Software Title or the particular
Online Content.  If Microsoft determines,
at any time prior to the Commercial Release of a Software Title or Online
Content, that such Software Title or Online Content does not materially comply
with the requirements set forth in the Xbox 360 Publisher Guide or to any applicable
laws, then Microsoft has the right, in Microsoft’s sole discretion and
notwithstanding any prior approvals given by Microsoft, to terminate this
Agreement without cost or penalty, as a whole or on a Software Title by
Software Title, or Sales Territory by Sales Territory basis upon written notice
to Publisher with respect to such Software Title or Sales Territory.

17.3        Effect of Termination;
Sell-off Rights. 
Upon termination or expiration of this Agreement, Publisher has no
further right to exercise the rights licensed hereunder or within the XDK
License and shall promptly cease all manufacturing of FPU through its
Authorized Replicators and, other than as provided below, cease use of the
Licensed Trademarks.  Publisher shall
have a period of ****, to sell-off its inventory of FPUs existing as of the
date of termination or expiration, after which sell-off period Publisher shall
immediately return all FPUs to an Authorized Replicator for destruction.  Publisher shall cause the Authorized
Replicator to destroy all FPUs and issue to Microsoft written certification by
an authorized representative of the Authorized Replicator confirming the
destruction of FPUs required hereunder. 
All of Publisher’s obligations under this Agreement shall continue to
apply during such **** sell-off period. 
If this Agreement is terminated due to Publisher’s breach, at Microsoft’s
option, Microsoft may require Publisher to immediately destroy all FPUs not yet
distributed to Publisher’s distributors, dealers and/or end users and shall
require all those distributing the FPU over which it has control to cease
distribution.  Upon termination or
expiration of this Agreement, Publisher shall continue to support existing
Online Game Features for FPUs that have already been sold until the end of the
Minimum Commitment term.

17.4         Cross-Default.  If Microsoft has the right to terminate this
Agreement, then Microsoft may, at its sole discretion also terminate the XDK
License.  If Microsoft terminates the XDK
License due to a breach by Publisher, then Microsoft may, at its sole
discretion also terminate this Agreement.

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

 

15

17.5         Survival.  The following provisions shall
survive expiration or termination of this Agreement: Sections 2, 6.2.2 (as to the
Minimum Commitment), 6.2.3, 8 and Sections 1, 2 and 5 of Exhibit 1, 9.1-9.3,
10.3, 10.4, 11, 13.1, 14, 15, 16, 17.3, 17.5 and 18.

18.          General

18.1         Governing Law; Venue; Attorneys Fees.  This Agreement is to be
construed and controlled by the laws of the State of Washington, U.S.A., and Publisher
consents to exclusive jurisdiction and venue in the federal courts sitting in
King County, Washington, U.S.A., unless no federal jurisdiction exists, in
which case Publisher consents to exclusive jurisdiction and venue in the
Superior Court of King County, Washington, U.S.A.  Publisher waives all defenses of lack of
personal jurisdiction and forum non conveniens. 
Process may be served on either party in the manner authorized by
applicable law or court rule.  The
English version of this Agreement is determinative over any translations
thereof.  If either party employs attorneys to enforce any rights arising out of
or relating to this Agreement, the prevailing party is entitled to recover its
reasonable attorneys’ fees, costs and other expenses.  This
choice of jurisdiction provision does not prevent Microsoft from seeking
injunctive relief with respect to a violation of intellectual property rights
or confidentiality obligations in any appropriate jurisdiction.

18.2         Notices; Requests.  All
notices and requests in connection with this Agreement are deemed given on the ****
after they are deposited in the applicable country’s mail system (****), postage prepaid, certified or registered,
return receipt requested; or **** sent by overnight courier, charges prepaid,
with a confirming fax; and addressed as follows:

 

	
  Publisher:

  	
  THQ Inc.

  	
   

  	
  Microsoft:

  	
  MICROSOFT
  LICENSING, GP

  
	
   

  	
  29903 Agoura
  Road

  	
   

  	
   

  	
  6100 Neil Road,
  Suite 100

  
	
   

  	
  Agoura Hills, CA
  91301

  	
   

  	
   

  	
  Reno, NV
  89511-1137

  
	
   

  	
   

  	
   

  	
   

  
	
  Attention: 

  	
  President &
  CEO

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fax:

  	
  818.871-4700

  	
   

  	
  Attention:

  	
  Xbox Accounting
  Services

  
	
  Phone: 

  	
  818-871-5000

  	
   

  	
   

  	
   

  
	
  Email: 

  	
  bjfarrell@thq.com

  	
   

  	
  with a cc to:

  	
  MICROSOFT
  CORPORATION

  
	
   

  	
   

  	
   

  	
  One Microsoft
  Way

  
	
   

  	
   

  	
   

  	
  Redmond, WA
  98052-6399

  
	
   

  	
   

  	
   

  	
   

  
	
  With a cc to:
  Executive VP, Business & Legal Affairs (same address)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fax: 

  	
  818.871-7593

  	
   

  	
  Attention:

  	
  Law &
  Corporate Affairs Department

  
	
  Phone: 

  	
  818.871-5080

  	
   

  	
   

  	
  Assoc. General
  Counsel, Consumer Legal

  
	
  Email: 

  	
  jkennedy@thq.com

  	
   

  	
   

  	
  Group (H&ED)

  
	
   

  	
   

  	
   

  	
  Fax: (425)
  936-7329

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
								

 

or to such other address as the party to receive the
notice or request so designates by written notice to the other.

18.3         No Delay or Waiver.  No delay or failure of either party at
any time to exercise or enforce any right or remedy available to it under this
Agreement, and no course of dealing or performance with respect thereto, will
constitute a waiver of any such right or remedy with respect to any other
breach or failure by the other party. 
The express waiver by a party of any right or remedy in a particular
instance will not constitute a waiver of any such right or remedy in any other
instance.  All rights and remedies will
be cumulative and not exclusive of any other rights or remedies.

18.4         Assignment.  Publisher
may not assign this Agreement or any portion thereof, to any third party unless
Microsoft expressly consents to such assignment in writing.  Microsoft will have the right to assign this
Agreement and/or any portion thereof as Microsoft may deem appropriate and/or
authorize its affiliates or partners to perform this Agreement in whole or part
on its behalf.  For the purposes of this
Agreement, a merger, consolidation, or other corporate reorganization, or a
transfer or sale of a controlling interest in a party’s stock, or of all or
substantially all of its assets is to be deemed to be an assignment.  This Agreement will inure to the benefit of
and be binding upon the parties, their successors, administrators, heirs, and
permitted assigns.

18.5         No Partnership.  Microsoft and Publisher are entering into a
license pursuant to this Agreement and nothing in this Agreement is to be
construed as creating an employer-employee relationship, a partnership, a
franchise, or a joint venture between the parties.

18.6         Severability.  if any provision of
this Agreement is found invalid or unenforceable pursuant to judicial decree or
decision, the remainder of this Agreement shall remain valid and enforceable
according to its terms.  The parties
intend that the provisions of this Agreement be enforced to the fullest extent
permitted by applicable law. 
Accordingly, the parties 

 

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

 

16

agree that if any provisions
are deemed not enforceable, they are to be deemed modified to the extent
necessary to make them enforceable.

18.7         Injunctive Relief.  The parties agree that Publisher’s threatened
or actual unauthorized use of the Licensed Trademarks or other Microsoft
proprietary rights whether in
whole or in part, may result in immediate and irreparable damage to Microsoft
for which there may be no
adequate remedy at law.  Either party’s
threatened or actual breach of the confidentiality provisions may cause damage
to the non-breaching party, and in such event the non-breaching party is entitled
to seek appropriate injunctive
relief from any court of competent jurisdiction without the necessity of posting bond or other security.

18.8         Entire Agreement;
Modification; No Offer.  This
Agreement (including the Concept, the Non-Disclosure Agreement, the Xbox 360
Publisher Guide, written amendments thereto, and other incorporated documents) and the XDK
License constitute the entire agreement between the parties with respect to the
subject matter hereof and merges all prior and contemporaneous communications.  This Agreement shall not be modified except by
a written agreement dated subsequent hereto signed on behalf of Publisher and
Microsoft by their duly authorized representatives.  Neither this Agreement nor any written or
oral statements related hereto constitute an offer, and this Agreement is not
legally binding until executed by both parties hereto.

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the
Effective Date on the dates indicated below.

 

	
  MICROSOFT LICENSING, GP

  	
   

  	
  THQ Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By (sign)

  	
   

  	
  By (sign)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (Print)

  	
   

  	
  Name (Print)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Date

  

 

 

17

EXHIBIT 1

 

PAYMENTS

1.                      Platform Royalty

a.             For each FPU manufactured during
the term of this Agreement, Publisher shall pay Microsoft nonrefundable
royalties in accordance with the royalty tables set forth below (Tables 1 and
2) and the “Unit Discount” table set forth in Section 1.d of this Exhibit 1
(Table 3).

b.             The
royalty fee is determined by the “Threshold Price” (which is the Wholesale
Price (WSP) or Suggested Retail Price (SRP) at which Publisher intends to sell
the Software Title in the applicable Sales Territory).  To determine the applicable royalty rate for
a particular Software Title in a particular Sales Territory, the applicable
Threshold Price from Table 1 below will determine the correct royalty “Tier.”  The royalty fee is then as set forth in Table
2 based on the Manufacturing Region in which the FPUs will be
manufactured.  For example, assume the Wholesale Price of a Software Title to be sold in
the European Sales Territory is ****.  According to Table 1, **** royalty
rates will apply to that Software Title and the royalty rate is determined in Table 2 by the Manufacturing
Region.  If the Software Title were
manufactured in the European Manufacturing Region, the royalty fee would be **** per FPU. 
If the Software Title were manufactured in Asian Manufacturing Region, the royalty fee
would be **** per FPU.

 

	
  ****

  
	
   

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  

* ****

	
  ****

  
	
   

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  

 

c.             Setting the Royalty.  Publisher shall submit to Microsoft,
at least **** for a Software Title, a completed and signed “Royalty Tier
Selection Form” in the form attached to this Agreement as Exhibit 2 for
each Sales Territory.  The selection
indicated in the Royalty Tier Selection Form will only be effective once the Royalty
Tier Selection Form has been accepted by Microsoft.  If Publisher does not submit a Royalty Tier
Selection Form as required hereunder, the royalty fee for such Software Title
will default to ****, regardless of the actual Threshold Price.  The selection of a royalty tier for a
Software Title in a Sales Territory is binding for the life of that Software
Title even if the Threshold Price is reduced following the Software Title’s
Commercial Release.

d.             Unit Discounts.  
Publisher is eligible for a discount to FPUs manufactured for a particular
Sales Territory (a “Unit Discount”) based on the number of FPUs that have been
manufactured for sale in that Sales Territory as described in Table 3
below.   Except as provided in
Section 4 below, units manufactured for sale in a Sales Territory are
aggregated only towards a discount on FPUs manufactured for that Sales
Territory; there is no worldwide or cross-territorial aggregation of units for
a particular Software Title.  The discount will be rounded up to the
nearest Cent, Yen or hundredth of a Euro.

 

 

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

 

 

1

 

	
  Table
  3: Unit Discounts

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  
	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  	
  ****

  

 

****

 

i.              For North American Sales Territory:

****

****

****

ii.             For Japan Sales Territory:

****

2.                      Payment Process

a.             Publisher shall not authorize its
Authorized Replicators to begin production until such time as ****.  Depending upon Publisher’s credit worthiness,
Microsoft may, but is not obligated to, offer Publisher credit terms for the
payment of royalties due under this Agreement within **** of receipt of invoice.   All payments will
be made by wire transfer only, in accordance with the payment instructions set
forth in the Xbox 360 Publisher Guide.

b.             Publisher will pay royalties for
FPUs manufactured in the North American Manufacturing Region in US Dollars, for
FPUs manufactured in the Asian Manufacturing Region in Japanese Yen and for
FPUs manufactured in the European Manufacturing Region in Euros.

3.                      Billing Address

a.             Publisher may have only two “bill
to” addresses for the payment of royalties under this Agreement, one for the
North American Manufacturing Region and one for the Asian Manufacturing
Region.  If Publisher desires to have a “bill-to”
address in a European country, Publisher (or a Publisher Affiliate) must execute
an MIOL Enrollment Form in the form attached to this Agreement as Exhibit 3.

Publisher’s billing address(es) is as follows:

	
  North America Manufacturing Region:

  	
  Asian Manufacturing Region (if different):

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  THQ Inc.

  	
  Name:

  	
   

  
	
  Address:                

  	
  29003 Agoura Road

  	
  Address:

  	
   

  
	
   

  	
  Agoura Hills, CA 91391

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
  Attention:

  	
   

  
	
  Email address:

  	
   

  	
   

  	
  Email address:

  	
   

  
	
  Fax:

  	
  818-871-7400

  	
  Fax:

  	
   

  
	
  Phone:

  	
  818-871-5000

  	
  Phone:

  	
   

  

4.                      Asia Simship Program

The purpose of this program is to encourage Publisher
to release Japanese FPUs or North American FPUs, that have been multi-region
signed to run on NTSC-J boxes (hereinafter collectively referred to as “Simship
Titles”), in Hong Kong, Singapore and Taiwan (referred to as “Simship Territory”)
at the same time as Publisher releases the Software Title in the Japan and/or
North American Sales Territories.  In
order for a Software Title to qualify as a Simship Title, Publisher must

 

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

 

2

release the Software Title in the Simship Territory on
the same date as the Commercial Release date of such Software Title in the
Japan and/or North American Sales Territories, wherever the Software Title was
first Commercially Released (referred to as “Original Territory”).  To the extent that a Software Title qualifies
as a Simship Title, the applicable royalty tier (under Section 1.b of this Exhibit
1 above) and Unit Discount (under Section 1.d of this Exhibit 1
above) is determined as if all FPUs of such Software Title manufactured for
distribution in both the Original Territory and the Simship Territory were
manufactured for distribution in the Original Territory.  For example, if a Publisher initially
manufactures **** FPUs of a Software Title for the Japan Sales Territory and
simships **** of those units to the Simship Territory, the royalty fee for all
of the FPUs is determined by ****.  In
this example, Publisher would also receive a **** Unit Discount on **** units
for having exceeded the Unit Discount level specified in Section 1. d of this Exhibit
1 above applicable to the Japan Sales Territory.  Publisher must provide Microsoft with written
notice of its intention to participate in the Asian Simship Program with
respect to a particular Software Title at least **** prior to manufacturing any
FPUs it intends to qualify for the program. 
In its notice, Publisher shall provide all relevant information,
including total number of FPUs to be manufactured, number of FPUs to be
simshipped into the Simship Territory, date of simship, etc.  Publisher remains responsible for complying
with all relevant import, distribution and packaging requirements as well as
any other applicable requirements set forth in the Xbox 360 Publisher Guide.

5.                      Online Content

a.             For the purpose of this Section 5, the following
capitalized terms have the following meanings:

****

****

b.             Publisher may, from time to time,
submit Online Content to Microsoft for Microsoft to distribute via Xbox
Live.  ****

c.             ****

d.             ****

e.             Within **** after the end of ****
with respect to which Microsoft owes Publisher any Royalty Fees, Microsoft
shall furnish Publisher with a written statement, together with payment for any
amount shown thereby to be due to Publisher. 
The statement will contain information sufficient to discern how the
Royalty Fees were computed.

6.                      Xbox Live Billing and Collection

Microsoft is responsible for billing and
collecting all fees associated with Xbox Live, including fees for subscriptions
and/or any Online Content for which a Xbox Live User may be charged.  ****

7.             Taxes

a.             The amounts to be paid by either
party to the other do not include any foreign, U.S. federal, state, local,
municipal or other governmental taxes, duties, levies, fees, excises or
tariffs, arising as a result of or in connection with the transactions
contemplated under this Agreement including, without limitation, (i) any state
or local sales or use taxes or any value added tax or business transfer tax now
or hereafter imposed on the provision of any services to the other  party under this Agreement, (ii) taxes
imposed or based on or with respect to or measured by any net or gross income
or receipts of either party, (iii) any franchise taxes, taxes on doing
business, gross receipts taxes or capital stock taxes (including any minimum taxes
and taxes measured by any item of tax preference), (iv) any taxes imposed or
assessed after the date upon which this Agreement is terminated, (v) taxes
based upon or imposed with reference to either parties’ real and/or personal
property ownership and (vi) any taxes similar to or in the nature of those
taxes described in (i), (ii), (iii), (iv) or (v) above, now or hereafter
imposed on either party (or any third parties with which either party is
permitted to enter into agreements relating to its undertakings hereunder) (all
such amounts, together with any penalties, interest or any additions thereto,
collectively “Taxes”).   Neither party is
liable for any of the other party’s Taxes incurred in connection with or
related to the sale of goods and services under this Agreement, and all such
Taxes are the financial responsibility of the party obligated to pay such taxes
as determined by the applicable law, provided that both parties shall pay to
the other the appropriate Collected Taxes in accordance with subsection 6.b
below. Each party agrees to indemnify, defend and hold the other party harmless
from any

 

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

 

3

Taxes (other than Collected Taxes, defined
below) or claims, causes of action, costs (including, without limitation,
reasonable attorneys’ fees) and any other liabilities of any nature whatsoever
related to such Taxes to the extent such Taxes relate to amounts paid under
this Amendment.

b.             Any sales or use  taxes described in 6.a above that (i) are
owed by either party solely as a result of entering into this Agreement and the
payment of the fees hereunder, (ii) are required to be collected from that
party under applicable law, and (iii) are based solely upon the amounts payable
under this Agreement (such taxes the “Collected Taxes”), will be stated
separately as applicable on payee’s invoices and will be remitted by the other
party to the payee, upon request payee shall remit to the other party official
tax receipts indicating that such Collected Taxes have been collected and paid
by the payee.  Either party may provide
the other party an exemption certificate acceptable to the relevant taxing
authority (including without limitation a resale certificate) in which case
payee shall not collect the taxes covered by such certificate.  Each party agrees to take such commercially
reasonable steps as are requested by the other party to minimize such Collected
Taxes in accordance with all relevant laws and to cooperate with and assist the
other party, in challenging the validity of any Collected Taxes or taxes
otherwise paid by the payor party.  Each
party shall indemnify and hold the other party harmless from any Collected Taxes,
penalties, interest, or additions to tax arising from amounts paid by one party
to the other under this Agreement, that are asserted or assessed against one
party to the extent such amounts relate to amounts that are paid to or
collected by one party from the other under this section. If any taxing
authority refunds any tax to a party that the other party originally paid, or a
party otherwise becomes aware that any tax was incorrectly and/or erroneously
collected from the other party, then that party shall promptly remit to the
other party an amount equal to such refund, or incorrect collection as the case
may be plus any interest thereon.

c.             If taxes are required to be
withheld on any amounts otherwise to be paid by one party to the other, the
paying party shall deduct such taxes from the amount otherwise owed and pay
them to the appropriate taxing authority. 
At a party’s written request and expense, the parties shall use
reasonable efforts to cooperate with and assist each other in obtaining tax certificates
or other appropriate documentation evidencing such payment, provided, however,
that the responsibility for such documentation shall remain with the payee
party.  If one party is required by any
non-U.S.A. government to withhold income taxes on payments to the other party,
then such party may deduct such taxes from the amount owed to the other party
and shall pay them to the appropriate tax authority, provided that within ****
of such payment, such party delivers to the other party an official receipt for
any such taxes withheld or other documents necessary to enable the other party
to claim a U.S.A. Foreign Tax Credit.

d.             This Section 7 shall govern the
treatment of all taxes arising as a result of or in connection with this
Agreement notwithstanding any other section of this Agreement.

8.             Audit

During the term of this Agreement and for **** each
party shall keep all usual and proper records related to its performance under
this Agreement, including but not limited to audited financial statements and
support for all transactions related to the ordering, production, inventory,
distribution and billing/invoicing information. 
Such records, books of account, and entries will be kept in accordance
with generally accepted accounting principles. 
Either party (the “Auditing Party”) may audit and/or inspect the other
party’s (the “Audited Party”) records no more than **** in any **** period  in order to verify  compliance with the terms of this
Agreement.  The Auditing Party may, upon
reasonable advance written notice, audit the Audited Party’s records and
consult with the Audited Party’s accountants for the purpose of verifying the
Audited Party’s compliance with the terms of this Agreement and for a period of
****.  Any such audit will be conducted
during regular business hours at the Audited Party’s offices.  Any such audit will be paid for by Auditing
Party unless Material discrepancies are disclosed.  As used in this section, “Material” means ****.  If Material discrepancies are disclosed, the
Audited Party agrees to pay the Auditing Party for ****.

 

 

 

 

 

 

 

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

 

 

4

 

EXHIBIT 2

 

XBOX 360 ROYALTY TIER SELECTION
FORM

 

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE
FORM, AND FAX IT TO MICROSOFT AT 

+1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT
LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

 

NOTES:

1.         THIS FORM MUST BE SUBMITTED AT LEAST ****.  IF THIS FORM IS NOT SUBMITTED ON TIME, THE
ROYALTY RATE WILL DEFAULT TO **** FOR THE APPLICABLE SALES TERRITORY.

2.         A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES
TERRITORY.

 

 

1.               Publisher
Name:_____________________________________________________________________

 

2.               Xbox 360 Software
Title Name: ___________________________________________________________

 

	
  3.

  	
  XeMID Number:

  	
  4.

  	
  Manufacturing Region (check one):

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  North American

  
	
   

  	
   

  	
   

  	
   

  	
  European

  
	
   

  	
   

  	
   

  	
   

  	
  Asian

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Sales Territory (check one):

  	
  6.

  	
  Final Certification Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  North American Sales Territory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Japan Sales Territory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  European Sales Territory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Asian Sales Territory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Select Royalty Tier: (check one):    ****

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

The undersigned represents that he/she has authority to submit this
form on behalf of the above publisher, and that the information contained
herein is true and accurate.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By (sign)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name, Title (Print)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  E-Mail Address (for confirmation of receipt)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Date (Print mm/dd/yy)

  	
   

  	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

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

 

 

 

1

 

EXHIBIT 3

 

XBOX 360 PUBLISHER ENROLLMENT
FORM

 

PLEASE
COMPLETE THIS FORM, SIGN IT, AND FAX IT TO MICROSOFT AT

+1 (425)
708-2300 TO THE ATTENTION OF YOUR ACCOUNT MANAGER.

 

NOTE: 
PUBLISHER MUST COMPLETE, SIGN AND SUBMIT THIS ENROLLMENT FORM ****.

 

This Xbox 360 Publisher License Enrollment (“Enrollment”)
is entered into between Microsoft Ireland Operations Ltd. (“MIOL”) and
__________________ (“Publisher”), and is effective as of the latter of the two
signatures identified below.   The terms
of that certain Xbox 360 Publisher License Agreement signed by Microsoft
Licensing GP and __________________ 
dated on or about 
_________________  (the “Xbox 360 PLA”)
are incorporated herein by reference.

 

1.             Term.  This Enrollment will expire on the date on
which the Xbox 360 PLA expires, unless it is terminated earlier as provided for
in that agreement.

 

2.             Representations
and Warranties.  By signing this
Enrollment, the parties agree to be bound by the terms of this Enrollment and
Publisher represents and warrants that: (i) it has read and understood the Xbox
360 PLA, including any amendments thereto, and agree to be bound by those; (ii)
it is either the entity that signed the Xbox 360 PLA or its affiliate; and
(iii) the information that provided herein is accurate.

 

3.             Notices;
Requests.  All notices and requests
in connection with this Enrollment are deemed given on (i) the **** after they
are deposited in the applicable country’s mail system (**** if sent
internationally), postage prepaid, certified or registered, return receipt
requested; or (ii) **** after they are sent by overnight courier, charges
prepaid, with a confirming fax; and addressed as follows:

 

	
  Publisher:

  	
  THQ (UK) Limited

  	
  Microsoft:

  	
  MICROSOFT IRELAND OPERATIONS LTD.

  
	
   

  	
   

  	
   

  	
  Microsoft European Operations Centre,

  
	
  Address:

  	
  Ground Floor, Block A, Dukes Court, 

  	
   

  	
  Atrium Building Block B,

  
	
   

  	
  Duke Street, Woking, Surrey,

  	
   

  	
  Carmenhall Road,

  
	
   

  	
  GU21 5BH, UK

  	
   

  	
  Sandyford Industrial Estate

  
	
   

  	
   

  	
   

  	
  Dublin 18

  
	
  Attention:

  	
  Sharron Traversari

  	
   

  	
  Ireland

  
	
   

  	
   

  	
   

  	
   

  
	
  Fax:

  	
  +44 1483 770 727

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Fax: 353 1 706 4110

  
	
  Phone:

  	
  +44 1483 227 261

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  MIOL Xbox Accounting Services

  
	
  Email:

  	
  straversari@thq.com

  	
   

  	
   

  
	
   

  	
   

  	
  with a cc to:

  	
  MICROSOFT CORPORATION

  
	
   

  	
   

  	
   

  	
  One Microsoft Way

  
	
   

  	
   

  	
   

  	
  Redmond, WA 
  98052-6399

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Law & Corporate Affairs Department Consumer

  
	
   

  	
   

  	
   

  	
  Legal Group, H&ED (Xbox)

  
	
   

  	
   

  	
   

  	
  Fax:  +1 (425) 706-7329

  
	
   

  	
   

  	
   

  	
   

  

 

or to such other address as the party to receive the notice or request
so designates by written notice to the other.

 

 

[remainder of page
intentionally left blank]

 

 

 

 

 

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

 

 

2

 

4.             Billing
Address.     For purposes of the Xbox 360 PLA, Exhibit 1,
Section 3, Publisher’s billing address for the European Manufacturing Region is
as follows:

 

	
  Name:

  	
  THQ (UK) LIMITED

  
	
   

  	
   

  
	
  Address:

  	
  Ground Floor, Block A, Dukes Court

  
	
   

  	
  Duke Street, Woking, , Surrey, GU21 5BH, UK

  
	
   

  	
   

  
	
  VAT number:

  	
  GB765342225

  
	
   

  	
   

  
	
  Attention:

  	
  Sharron Traversari

  
	
   

  	
   

  
	
  Email address:

  	
  straversari@thq.com

  
	
   

  	
   

  
	
  Fax:

  	
  +44 1483 770 727

  
	
   

  	
   

  
	
  Phone:

  	
  +44 1483 227 261

  
	
   

  	
   

  

 

 

MICROSOFT IRELAND OPERATIONS LTD.                             PUBLISHER: THQ (UK) LIMITED

 

 

	
   

  	
   

  	
   

  	
   

  
	
  By (sign)

  	
   

  	
   

  	
  By (sign)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name (Print)

  	
   

  	
   

  	
  Name (Print)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date (Print mm/dd/yy)

  	
   

  	
   

  	
  Date (Print mm/dd/yy)

  

 

 

3

 

EXHIBIT 4

 

AUTHORIZED AFFILIATES

Publisher affiliates
authorized to perform the rights and obligations under this Agreement are:

 

	
  I.

  	
   

  	
  Name:

  	
   

  	
   

  	
  II.

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  	
  Fax:

  	
   

  	
   

  	
   

  	
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Publisher will provide
Microsoft at least **** written notice of the name and address of each
additional Publisher affiliate that Publisher wishes to add to this Exhibit 4.  Any additional Publisher affiliate may not
perform any rights or obligations under this Agreement until it has signed and
submitted a Publisher Affiliate Agreement (attached below) to Microsoft

 

PUBLISHER
AFFILIATE AGREEMENT

 

For good and valuable consideration, ______________________, a
corporation of ______________________ (“Publisher  Affiliate “) hereby covenants and agrees with
Microsoft Licensing, GP, a
Nevada general partnership that Publisher  Affiliate will comply with all obligations of
_________________________(“Publisher”) pursuant to that certain Xbox 360
Publisher License Agreement between Microsoft and Publisher dated
______________, 200___ (the “Xbox 360 PLA”) and to be bound by the terms and
conditions of this Publisher Affiliate Agreement.  Capitalized terms used herein and not
otherwise defined will have the same meaning as in the Agreement.

Publisher Affiliate acknowledges that its agreement herein is a
condition for Publisher Affiliate to exercise the rights and perform the
obligations established by the terms of the Xbox 360 PLA.  Publisher Affiliate and Publisher will be
jointly and severally liable to Microsoft for all obligations related to
Publisher Affiliate’s exercise of the rights, performance of obligations, or
receipt of Confidential Information under the Xbox 360 PLA.  This Publisher Affiliate Agreement may be
terminated in the manner set forth in the Xbox 360 PLA.  Termination of this Publisher Affiliate
Agreement does not terminate the Xbox 360 PLA with respect to Publisher or any
other Publisher Affiliates.

IN WITNESS WHEREOF, Publisher Affiliate has executed this agreement as
of the date set forth below.  All signed
copies of this Publisher Affiliate Agreement will be deemed originals.

 

___________________________

Signature

 

___________________________

Title

 

___________________________

Name
(Print)

 

___________________________

Date

 

 

 

 

 

 

 

 

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

 

1

 

EXHIBIT 5

 

NON-DISCLOSURE AGREEMENT

 

 

[Attached]

 

 

 

1

 

EXHIBIT 6

 

JAPAN AND ASIA ROYALTY INCENTIVE
PROGRAM

1.                      Overview

To encourage Publisher to release localized Software
Titles in the Japan and Asian Sales Territories during ****, Publisher may
qualify for a special incentive payment equal to **** according to the terms of
this Exhibit 6 (the “Royalty Incentive Program”).

2.                      Qualified FPUs

In order to qualify for the Royalty Incentive Program,
the following requirements must be met.

                a.             Approved Concept
Submission Form.  Publisher must send
Microsoft a completed Concept submission form (in a format to be provided by
Microsoft) for any Software Titles Publisher intends to qualify for the Royalty
Incentive Program no later than ****.  
In order for FPUs to qualify for the Royalty Incentive Program,
Publisher’s Concept for the Software Title must be received on time and
approved by Microsoft, such approval not to be unreasonably withheld.

                b.             J-signed.  Only FPUs that are “J-signed” (as defined in
the Xbox 360 Publisher Guide) to technically restrict their operation to Xbox
consoles made for the Japan and Asian Sales Territories will qualify for the
Royalty Incentive Program.

                c.             ****

                d.             ****

e.             Public Relations.  In order to qualify for the Royalty Incentive
Program, Publisher must allow Microsoft to publicly disclose that the Software
Title will be released on Xbox 360 in the Japan or Asian Sales Territories;
provided, that the form and content of such public disclosure is subject to
Publisher’s prior written approval.

                f.              Timely Payment.  Publisher must pay royalty fees on time in
accordance with this Agreement or its credit arrangement with Microsoft in
order to qualify for the Royalty Incentive Program.

3.                      Payment

a.             Manufacturing Periods.  The Royalty Incentive Program will only apply
to qualified FPUs manufactured **** (as applicable for the FPU).

b.             Incentive Payments.  Microsoft will make royalty incentive
payments within **** in which qualified FPUs were manufactured.

c.             Limit.   Subject to the terms of this Exhibit 6,
Publisher’s royalty incentive payment will equal ****.   Publisher acknowledges that the Royalty
Incentive Payment will only apply to ****

 

 

 

 

 

 

 

 

 

 

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

 

 

2

 

EXHIBIT 7

 

XBOX 360 LIVE INCENTIVE PROGRAM

 

 

1.                      Xbox 360 Live Incentive Program

To encourage Publisher to support functionality for
Xbox Live in its Xbox 360 Software Titles and to drive increased usage of Xbox
Live via Xbox 360, Publisher may qualify for certain payments based on the
amount of Xbox Live Market Share (defined in Section 2.a. of this Exhibit 7
below) created by Publisher’s Multiplayer Software Titles (defined in Section
2.c. of this Exhibit 7 below). 
Each Accounting Period (defined in Section 3.c. of this exhibit below),
Microsoft will calculate Publisher’s Xbox Live Market Share.  If it is above ****, then Microsoft will pay
Publisher an amount ****.   The basic
equation for calculating the Publisher’s payment under this program is:

****

The following sections
define the elements of this basic equation.

Notwithstanding anything
herein to the contrary, use of or revenue derived from online games for which
an end user pays a subscription separate from any account established for basic
use of Xbox Live, are excluded from this Xbox 360 Live Incentive Program.

2.                      Xbox Live Market Share

a.             “Xbox Live Market Share”
= ****.

b.             “**** Unique User Market
Share” means ****.

c.             “Multiplayer Software
Titles” means a Software Title for Xbox 360 that supports real-time
multiplayer game play.

d.             “**** Unique Users”
means ****.

e.             “Paying Subscriber”
means ****.

f.              “**** Unique User Market
Share” means ****.

g.             “**** Unique Users” means
the ****.

h.             “New Subscriber Market
Share” means ****.

i.              “New Subscriber”
means a Paying Subscriber who pays for an Xbox Live account for the first time. 
A New Subscriber is attributed to the first Multiplayer Software Title he or
she plays, even if such play was during a free-trial period which was later
converted into a paying subscription. 
Each Paying Subscriber can only be counted as a New Subscriber once.

3.                      Participation Pool

a.             “Participation Pool”
means ****.

b.             “Subscription Revenue” means
****.

c.             “Accounting Period” means
a ****, within the Term (defined below); provided that if the Effective Date of
this Agreement or the expiration date of this program falls within such ****,
then the applicable payment calculation set forth below shall be made for a
partial Accounting Period, as appropriate.

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

3

4.                      Example

****

5.              Term

This Xbox 360 Live Incentive Program will be available
for ****.    Microsoft reserves the right to change the
weights for averaging set forth in Section 2.a. of this exhibit upon written
notice to Publisher, but no more frequently than ****.

6.                      Payments

In the event Publisher qualifies for a payment under
this program during an Accounting Period, Microsoft shall furnish Publisher
with a statement, together with payment for any amount shown thereby to be due
to Publisher within ****.

 

 

 

 

 

 

 

 

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

 

 

4

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