Atari, Inc. has announced the completion of several restructuring initiatives focused on repositioning the company as a publisher and distributor of interactive gaming software, transitioning it out of the video game production business and potentially improving its financial position.
Atari has entered into an amendment to the Senior Secured Credit Facility with BlueBay High Yield Investments (Luxembourg) S.A.R.L. that will increase its borrowing capacity under the facility from $10 million to $14 million. The additional $4 million in availability under the Credit Facility will enable Atari to meet its holiday season financing needs. BlueBay is a significant shareholder of Infogrames Entertainment, S.A., Atari, Inc.'s majority stockholder.
Simultaneously with and as a condition to the increase in the availability under the Credit Facility, Atari, Inc. terminated its existing distribution agreements with Infogrames and has entered into a new distribution agreement covering the distribution by Atari, Inc. of interactive entertainment software games produced or acquired by Infogrames and its affiliates in North America. This new distribution agreement covers the distribution of Infogrames' products in North America for the next three years (subject to reduction to two years if certain performance targets are not met) and has provisions for automatic renewals on an annual basis unless terminated by either party in accordance with the agreement. The new distribution agreement provides that Atari, Inc. will retain 30% of the net receipts from the distribution of Infogrames' products as consideration for its services. The agreement also provides that the parties will enter into an agreement on the same terms for the distribution by Infogrames of Atari, Inc.'s products outside North America.
Additionally, as part of this agreement, Atari, Inc. has licensed back to Infogrames the use of the "Atari" trademark in North America in connection with the URL www.atari.com for the purposes of a global online initiative to be lead by Infogrames.
In light of the repositioning of Atari, Inc.'s business and the new distribution arrangements, Atari, Inc. has also terminated its existing corporate management and service contracts with Infogrames. This is anticipated to enable Atari, Inc. to further streamline its corporate structure. Atari, Inc. will continue to provide certain administrative functions to Infogrames on a transitional basis over an approximate 7 to 10 month period for an annualized fee of approximately $2.6 million. In addition, the parties terminated the agreement under which Infogrames provided certain management services to Atari, Inc. It is expected that the termination of this agreement will result in annualized cost savings to Atari, Inc. of approximately $3.0 million. As part of the termination of the corporate management service contracts and the reduction of production and development activities at Atari, Inc., Atari, Inc. agreed to the transfer of certain employees, with such employees' acceptance, from the production and development businesses of Atari, Inc. to Infogrames.
Atari, Inc. previously announced a reduction in its workforce, which included the production and development employees being transferred to Infogrames, that is expected to result in savings on current payroll and related costs of an estimated $5.3 million per year of which $1.3 million relates to the transfer of employees to Infogrames.
Atari also announced that it has settled its previously reported dispute with FUNimation Prods. Ltd. with respect to an audit of amounts due to FUNimation under certain sublicense agreements and other matters.
Under the terms of the settlement, Atari, Inc. paid to FUNimation $3.5 million, comprised of a cash payment of approximately $2.7 million and a reduction of $0.8 million in the amount of the recoupable royalty advance made to FUNimation. Atari, Inc. originally paid FUNimation $10 million in January 2004 to secure the exclusive interactive U.S. rights for the DRAGON BALL Z franchise through Jan. 2010. As previously disclosed in the company's Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2007, the company reserved the settlement as of Sept. 30, 2007.
Atari's current release from the DRAGON BALL franchise, DRAGON BALL Z: BUDOKAI TENKAICHI 3 for the PlayStation 2 and the Wii is rated T for Teen and is available at retailers across the U.S. for a suggested retail price of $49.95. For more information on Dragon Ball Z video games, please visit www.atari.com/dragonballz.
