Game Development Loan Agreement
This Game Development Loan Agreement ("Agreement") is made between the group of individuals and business entities listed at the end of this Agreement ("Lenders"), and _______________, a __________ ("Developer"), on _____, 20__ (“Effective Date”).
1. Purpose. Lenders agree to make a loan to Developer for the purpose of assisting Developer in the development of the video game ________ ("Game"). The loan will consist of an initial payment (“Initial Advance”) in the amount of $_____ USD and an additional payment in the amount of up to $______ USD which is subject to adjustment as described in Section 3 (“Additional Advance”). The total principal amount of the loan shall equal the sum of the Initial Advance and the Additional Advance delivered to Developer by Lenders under this Agreement (“Loan”).
2. Disbursement of Loan. The Loan shall be disbursed as follows:
(a) Upon execution of this Agreement, Lenders will deliver the Initial Advance to Developer. Each Lender will be responsible for delivering their share of the Loan directly to Developer.
(b) Subject to adjustment (Section 3) or termination (Section 5), Lenders will make a payment to Developer in the amount of the Additional Advance upon request from the Developer. Such request should be made at least thirty (30) calendar days in advance.
3. Adjustments. Upon written request by Developer, Lenders will reduce the amount of the Additional Advance to the amount requested by Developer. Developer may request to adjust the Additional Advance to a higher value, but approval of that increase would be at Lenders’ sole discretion. An increase requires unanimous approval by all Lenders.
4. Reporting. Upon request, Developer will electronically deliver the following set of materials to Lenders (“Development Update”):
(a) The latest build of the Game;
(b) An outline of the work that has been done on the Game since the last Development Update
5. No Obligation to Make Additional Advance. Lenders shall have no obligation to pay the Additional Advance and may, in their sole discretion, suspend or terminate the Additional Advance at any time upon written notice to Developer. Suspension/termination requires a two-thirds majority vote (based on outstanding principal amount of the Loan) among Lenders.
6. Repayment. Developer shall pay to Lenders one hundred percent (100%) of the gross revenue received by Developer from the licensing, sale, distribution or other exploitation of the Game (“Gross Revenue”) and fifty percent (50%) of the gross revenue received by Developer from the licensing, sale, distribution or other exploitation of any work based upon or derived from the Game, until the total amount paid by Developer to Lenders equals the Loan. Games that share only technology with the Game are not considered derivative works. Such payments shall be delivered to Lenders within thirty (30) days after receipt by Developer. Any late payments under this agreement will accrue interest at the rate of two percent (2%) per month or the highest interest rate permitted by applicable law, with a partial month treated as a full month. Revenue generated from Game after the Effective Date and before its release (e.g. pre-orders) is subject to Revenue Share (see Section 7) after the game is released and does not count towards Repayment.
7. Revenue Share. As additional consideration for Lenders’ willingness to make the Loan to Developer, Developer agrees to pay Lenders 25% of all Gross Revenue (including revenue generated by exploitation of any work based upon or derived from Games) received by Developer above the Loan amount (“Revenue Share”). The Revenue Share shall apply to the first dollar received by Developer above the Loan amount and all gross revenue received by Developer until the total payment to Lenders (Repayment plus Revenue Share) is equal to twice the Loan, or the Term has been reached. Developer shall pay the Revenue Share to Lenders quarterly, within Thirty (30) days after the end of the quarter in which Developer received the revenue subject to the Revenue Share.
8. Buyout. Developer may buy out the lenders by paying the lenders a total of twice the Loan amount (Buyout Multiplier). If payments to lenders have already been made prior to a Buyout, those payments count toward the total buyout amount. Lenders, at their own discretion and with a majority share vote, may reduce the Buyout Multiplier. Upon full Buyout payment, this agreement will be terminated. Sections 9 and 15 shall survive a Buyout termination.
9. Representations and Warranties. Developer warrants and represents that:
(a) Developer is a duly organized and existing business entity and in good standing under the laws of the state or country of its formation and is duly qualified or licensed to do business in all other countries, states and provinces in which the nature of its business or the ownership or use of property require Developer to be so qualified and/or licensed.
(b) Developer has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform this Agreement.
(c) The execution, delivery and performance by Developer of this Agreement shall not constitute a violation of any applicable law or a breach of any agreement to which Developer is a party or by which it is bound.
(d) The Games and all elements thereof are and shall be original works of authorship of Developer and no part thereof will misappropriate, infringe upon or violate any patent, copyright, trademark, trade secret, or other property right of any third party.
(e) Developer will use the Loan proceeds solely for the purpose of developing the Games
10. Reporting and Restrictions. So long as any Loan or Revenue Share payment is outstanding, Developer:
(a) Shall not sell, encumber or lease all or substantially all of its assets without prior written approval from Lenders.
(b) Shall not enter into any agreements relating to Game that may affect repayment of Loan or Revenue Share without prior written approval from Indie Fund. This includes, but is not limited to, publishing agreements, funding agreements, porting agreements, and promotional agreements.
(b) Shall provide Lender with a monthly revenue report itemizing all revenue received from the exploitation of the Games. If Developer receives revenue or sales reports from third parties, Developer shall provide such reports to Lenders within fourteen (14) days of receipt.
11. Audit Rights. Upon request, Developer will provide Lenders with Developer’s financial records for the period starting with the Effective Date of this Agreement and ending with the date on which the Term is reached.
12. Term. This Agreement will expire two (2) years after the first commercial release of the game, or when the total payment to Lenders equals twice the Loan, whichever is sooner. Sections 9, 11, 14, and 15 shall survive expiration.
13. Termination. Developer and Lenders may terminate the Agreement at any time, with or without reason, upon 30 days written notice. In such a case, notwithstanding the provisions of Section 12, Sections 6-15 shall survive termination.
14. Announcement. Developer and Lenders agree to work together on the timing and content of the announcement of this Agreement.
15. General.
(a) This Agreement is governed by California law, without giving effect to its choice of law rules. The courts located in San Francisco, California will have exclusive jurisdiction of any controversies regarding the Agreement and any action or other proceeding which involves such a controversy shall be brought in those courts and not elsewhere.
(b) For the convenience of the parties, this Agreement may be executed in counterparts, which together shall constitute one agreement. The counterparts of this Agreement may be delivered via electronic means, with the intention that they shall have the same effect as an original counterpart.
(c) Except as otherwise specifically provided, any action of the Lenders under this Agreement requires a majority vote of Lenders holding an outstanding principal amount of the Loan, and no Lender may take individual action under this Agreement, including without limitation, to enforce payment of the Loan. Any Lender may take action on behalf of all Lenders if and only if there has been a majority vote (as specified above) in favor of that action.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written.
Developer
[name] ([entity type / location])
address
Name: _________
Title: _________
_________________________________
Signature
_________________________________
Date
Lender 1
[name ([entity type / location])
address
Name: _______
Title: ________
Loan Amount: ________ USD
Share of Loan: _______%
____________________________________
Signature
____________________________________
Date
Lender 2
[name ([entity type / location])
address
Name: _______
Title: ________
Loan Amount: ________ USD
Share of Loan: _______%
____________________________________
Signature
____________________________________
Date
etc...