Document:

Exhibit 10. 4

   DATED:  19 day of April 2005

 

LICENSING AGREEMENT

Between

 

RED MILE ENTERTAINMENT, INC

 

And

 

THE CODEMASTERS SOFTWARE COMPANY LIMITED

 

For

 

HEROES OF THE PACIFIC

 

 

 

 

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LICENSING AGREEMENT

THIS LICENSING AGREEMENT, dated as of April 19, 2005 (together with the Exhibits attached hereto and as amended from time to time, the “Agreement”), is entered into by and between THE CODEMASTERS SOFTWARE COMPANY LIMITED (“Publisher”), with offices at Stoneythorpe, Southam, Warwickshire, CV47 2DL, England and Red Mile Entertainment, Inc., an Florida corporation (“Red Mile”), with offices at 4000 Bridgeway, Suite 101, Sausalito, CA 94965.

R E C I T A L S

	
            A.
 	
            Red Mile is in the business of, among other things, creating, managing and developing interactive games and software products.
 

	
            B.
 	
            Publisher is in the business of, among other things, publishing, manufacturing, marketing, distributing and selling interactive entertainment software products.
 

	
            C.
 	
            Publisher and Red Mile desire to enter into an arrangement under which Red Mile will license the Developed Title (as defined below), and Red Mile will grant to Publisher the right to sell and distribute the Developed Title, subject to and in accordance with the terms and conditions of this Agreement.
 

The parties agree as follows:

AGREEMENT

	
            Section 1.
 	
            Definitions. 
 

Capitalized terms used in this Agreement shall have the meaning assigned to such terms as described below:

 “Alpha Copy” in relation to the Game means a complete, running copy of the Game that contains all of the features of the Game that is capable of being used and tested but may contain Bugs and complies with all Codemasters’ Project Scope Considerations and any requirements set out in the Project Schedule. 

“Beta Copy” in relation to the Game means a complete running copy of the game that contains all of the features of the Game and is free from Bugs which either individually or in the aggregate would render the Beta Copy unfit for testing and complies with all Codemasters’ Project Scope Considerations and any requirements set out in the Project Schedule.

“Business Day” means every day of the week other than weekends and any holiday that constitutes a bank holiday in either the United Kingdom or Australia.

“Commercially Exploit” Without limitation, to use, copy, produce, publish, reproduce, make, manufacture, sell, license, rent, loan, let for hire, distribute, package, market, promote, advertise, solicit orders for, merchandise, issue copies to the public, demonstrate, transmit or communicate in or 

 

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to the public by telecommunication or any other means (such as interactive or non-interactive broadcasts via over the air, cable, satellite, Internet or otherwise), perform, show, display and exhibit (including perform , show, display and exhibit in public), import, bundle and otherwise commercially distribute and issue copies to the public by any means now known or hereinafter developed and authorize other persons to do any or all of the foregoing.

“Confidential Information” shall have the meaning set forth in Section 9.1 hereof.

“Customer Return” shall have the meaning set forth in Section 5.4 hereof.

“Deliverable” means any computer programming code, documentation and other material developed by Red Mile in connection with the milestones set forth in the Project Schedule.

“Developed Title” means collectively the interactive software product developed by Red Mile and/or IR Gurus Interactive under this Agreement, tentatively titled “Heroes of the Pacific” (or such other name as the parties shall mutually agree upon), compatible with each of the Platforms and which conforms to Codemasters’ Project Scope Considerations and any user manuals and/or other documentation created by Red Mile for distribution with such product.

“Red Mile Delay” means, with respect to each Developed Title, the aggregate amount of any delay caused by Red Mile in providing the applicable milestone or Gold Master to Publisher.

“Project Scope Considerations” means the project scope considerations set out in Exhibit C.

“Development Advances” shall have the meaning set forth in Section 5.1 hereof.

“Development Tool” means any tool, code, engine, subroutine or content that is (i) licensed by Red Mile from third parties, (ii) developed by Red Mile prior to or independent of the development of the Developed Titles, or (iii) used or created in connection with Red Mile’s development of the Developed Titles.

 “Effective Date” means the date of execution of this Agreement by both parties hereto.

“First Party” means any manufacturer of interactive hardware having mandatory approval rights over a Gold Master intended for use on such manufacturer’s hardware (e.g., Sony for the PS2 Platform and Microsoft for the Xbox Platform, as applicable).

“Gold Master” means a complete, fully functional, final version of a Developed Title or any update, revision or localization thereof prepared by Red Mile in compliance with all of Codemasters applicable Project Scope Considerations, which does not contain any Non-Conformities and which is approved by hardware manufacturer for replication and distribution to the general public without further modifications or testing.

“Intellectual Property or Intellectual Property Right” means all patent rights, copyrights, trademark/trade name rights as well as all registrations and applications, renewals and extensions therefore and such other intellectual property and/or proprietary rights recognized by U.S. laws and applicable foreign and international laws, treaties and conventions (including, but not limited to, ownership rights in all titles, computer code, themes, objects, characters, character names, stories, dialog, catch phrases, locations, concepts, artwork, animation, sounds, musical compositions, audio-visual effects and methods of operation, moral rights and any related documentation).

 

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 “License Period” shall have the meaning ascribed to such term in Section 8.1 hereof.

 “Net Revenue” means, in respect of sales of each Developed Title during the applicable payment period, an amount equal to (i) the amounts received by Codemasters for the applicable period, less (ii) the sum of (a) the costs of manufacturing and packaging  the Developed Titles (including any levy license fee, manufacturing royalty or manufacturing costs payable by Codemasters in respect of units of the Developed Title); (b) actual royalties paid to third party licensors, including without limitation, First Party royalties, crediting back any discounts received from such First Parties, (c) Customer Returns, sales discounts, channel rebates, price protection and other allowances, customary trade cash, quantity discounts; (d) any costs incurred by Codemasters to develop versions of the Game in other territories such as translating English script into
additional languages (e) the costs of distributing the Developed Titles, including  transport, insurance and distribution fees, and (f) VAT or other sales taxes included in such sums.

“Non-Conformity” means (i) in the reasonable opinion of Codemasters any material failure of a Developed Title to reflect the Project Scope Considerations or such other materials provided by Red Mile to Publisher; (ii) any material failure of a Developed Title to properly interface with the operation system software, hardware or any applicable Platform specified herein; (iii) inability of the Developed Title to perform any intended feature or function repeatedly, without interruption, loss of data or erroneously or improperly formatted output; (iv) any misspelled or incorrect text or typographical errors in the Developed Title; (v) any audiovisual display or other material which, in the reasonable discretion of the Publisher, is offensive/defamatory or could adversely affect the name, reputation and goodwill of Publisher or its licensors; (vi) any error or defect
relating to the proper localization of the Developed Title; and/or (vii) any reproducible virus, data bug or operational limiting routine or other error or defect that has a significant adverse effect upon the intended use, performance, operability or marketability of a Developed Title as reasonably determined by Publisher; provided however, that, defects in the physical media arising from duplication of or manufacture of copies of a Developed Title shall not constitute Non-Conformities. 

“Object Code” means the version of the applicable Developed Title in machine-readable and/or executable language format, including without limitation all “look and feel” elements of any computer program (such as, artwork, graphics, music, and sound); provided, however that the Object Code will not include any Source Code or Development Tools.

“Platforms” means, collectively, the following platforms (and formats): (i) PS2 in the PAL/Europe format; (ii) Xbox in the PAL/Europe format; and in the P.C. format.

“Port” means a conversion of a Developed Title to run on a platform other than one of the Platforms.

“Project Schedule” means, in respect of each of the Developed Titles, (i) the Project Schedule attached hereto and incorporated by reference herein as Exhibit A, (ii) together with the defined terms set forth on Exhibit B attached hereto, and (iii) as the same may be modified from time to time as the parties shall mutually agree in writing. 

“Publisher Materials” means artwork, copy, packaging, marketing/sales materials or any other materials specifically generated by, for or under the direction of Publisher for the purpose of satisfying its rights and obligations of the Agreement, excepting that Intellectual Property derived from the Developed Titles.

 

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“Red Mile” shall include collectively Red Mile Entertainment, Inc. and IR Gurus Interactive of Level 1, 96 Pelham Street, Carlton, Victoria, Australia; 

“Reserve” shall have the meaning set forth in Section 5.4 hereof.

“Royalties” shall have the meaning set forth in Section 5.2 hereof.

“Sequel” means an interactive software product complete in itself but continuing the narrative of or basing itself upon the Developed Title which is intended to be a sequel (or prequel) to the Game constituting a new and original game in its own right and is not a Port, enhancement, patch, add-on, expansion or similar derivative work.

“Source Code” means the version of the Developed Title in human-readable language format as prepared and written by the programmer(s) who developed such Developed Title, together with any build tools (e.g., compilers, linkers and other related tools), compile/link scripts, program comments, installation scripts and related documentation, but shall not include any Intellectual Property Right owned or controlled by Publisher and/or its licensors.

“Term” shall mean the period set forth in Section 8.1 hereof.

“Territory” means PAL countries.

“Third Party Materials” means the third party development and authoring tools, content and materials listed in Exhibit D attached hereto and incorporated by reference herein, that Red Mile contributes to or makes available for inclusion in or uses in connection with the Developed Title or the development thereof that (a) are the subject of Intellectual Property Rights licensed by third parties to Red Mile or which Red Mile is otherwise authorized to use and (b) do not otherwise constitute Work performed or to be performed by third parties in connection with this Agreement. Third Party Materials, their license transfers and any limits thereto, shall be listed on Exhibit D.

“Work” means the work performed or to be performed by Red Mile hereunder, and shall include all documentation, program materials, flow-charts, notes, outlines, formulae, processes, algorithms, ideas, inventions, know-how or techniques as well as all other expertise, skills, materials and/or knowledge necessary, required or desired to create the Developed Titles in accordance with the Project Scope Considerations.

	
            Section 2.
 	
            Grant of Rights. 
 

	
            2.1
 	
            Exclusive Distribution Rights. Subject to the terms, conditions and limitations of the Agreement, Red Mile hereby grants to Publisher, and Publisher hereby accepts from Red Mile, the exclusive right and license to Commercially Exploit the Developed Title (including distributing a strategy guide therefore) throughout the Territory during the Term of this Agreement, in the retail channel or via electronic download (either from Publisher directly or through its sub-distributors). For the avoidance of doubt, retail channel shall include brick and mortar stores, catalogs, as well as Internet-based retailers such as Amazon.com and AOL. Publisher shall use commercially reasonable efforts to market the Developed Title effectively and competitively in the Territory. However, Codemasters makes no representation
or warranty that the marketing and promotion of the Game shall be successful or that any minimum level of royalties shall become due to Red Mile beyond the Development Advances.
 

 

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            2.2
 	
            Sublicensing/OEM/Non-Retail. Red Mile hereby grants to Publisher, and Publisher hereby accepts from Red Mile, the exclusive right and license to use, copy, reproduce, modify, bundle publish, market, sell, distribute and sub-distribute the Developed Title throughout the Territory during the Term of this Agreement in connection with OEM, consumer direct, and premium promotion sales of the Developed Title. The rights granted to Publisher are sub-licensable, including for OEM purposes, provided that each such sub-licensee agrees to be bound by the terms and conditions of this Agreement. Publisher shall obtain Red Mile’s approval for each non-retail opportunity, such approval not be unreasonably withheld or delayed. Red Mile’s failure to either approve or disapprove such opportunity within five
(5) Business Days shall constitute Red Mile’s approval thereof. 
 

	
            2.3
 	
            Trademark & Artwork License. Red Mile hereby grants to Publisher the non-exclusive right and license in the Territory, for the Term, to use Red Mile’s and/or Red Mile’s licensors’ trademarks, trade names, logos, characters, designs, artwork, screen displays, packaging and promotional materials for the sole purpose of publicizing, promoting, distributing and selling the Developed Title and performing Publisher’s obligations under the Agreement. Publisher agrees that such materials shall remain the exclusive property of Red Mile and/or Red Miles’ licensors, and that Publisher will not obtain nor claim any rights in or to such trademarks except as expressly granted herein.
 

	
            2.4
 	
            Corporate Branding. Without limiting the generality of the foregoing, Red Mile hereby grants Publisher the right during the term of this Agreement to use reproductions of the Developed Title and all Intellectual Property Rights associated therewith for display in Publisher’s corporate brand portfolio. Such “Corporate Brand Portfolio” may include but shall not be limited to corporate brochures, presentation and marketing/promotional materials with respect to the corporation and its business. 
 

	
            2.5
 	
            Right of First Negotiation; Right of Last Refusal Red Mile hereby grants Publisher an exclusive right of first negotiation (the “RFN”) and a right of last refusal (the “rlr”) in connection with any interactive software product which is a Port, Sequel or other derivative work based on the Developed Title or any revised or replaced Title, revised or replaced pursuant to this Agreement, whether a video game, a computer game, or otherwise and whether currently or hereafter conceived (each, a “New Project”) as follows.
 

	
             
 	
            (a)
 	
            RFN. If Red Mile (or any entity acting by or on behalf of Red Mile) at any time during the Term hereof desires to develop and license a New Project (whether on its own initiative or that of a third party), before discussing or negotiating the New Project with any other party, Red Mile will send Publisher written notice thereof, together with a term sheet containing the material terms upon which Red Mile would propose to develop and license rights to the New Project. Thereafter, the parties shall negotiate with each other in good faith on an exclusive basis for a period of thirty (30) days and attempt to agree on the material terms thereof, during which period Red Mile shall refrain from any discussions or negotiations with any third parties concerning such New Project. If the parties fail to reach
agreement on the material terms by the end of such thirty (30) day period, Red Mile may commence discussions or negotiations with a third party for the New Project. 
 

	
             
 	
            (b)
 	
            RLR. At any time during the Term hereof and for a period of two years thereafter, prior to entering into any agreement or understanding with a third party to develop and license a New Project, Developer shall send written notice to Publisher together 
 

 

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with the material terms on which Developer is prepared to develop, and such third party is prepared to license, the New Project (the “Offer”) and any other supporting documentation reasonably necessary or appropriate for Publisher to determine whether to accept or reject such terms (provided that, if necessary or appropriate to comply with any confidentiality obligations to which Developer is subject, Developer may furnish Publisher with a summary of the material financial terms of such third party terms certified to be true and correct by an officer of Developer). Thereafter, Publisher shall have a period of thirty (30) Business Days to elect, by sending written notice to Developer, either (i) to accept the terms of the Offer (other than such terms which by their nature are inapplicable to Publisher, such as representations and warranties relating to such third party), in
which case the parties shall have a further thirty (30) days to negotiate in good faith the terms of a written agreement based on the terms of the Offer, or (ii) to reject such terms. If Publisher rejects such terms, Developer shall have ninety (90) days to enter into a written agreement with such third party on terms no more favorable to the third party than contained in the Offer, after which time if Developer has not entered into such agreement with such third party, any agreement or understanding by Developer relating thereto shall be deemed to constitute a “New Project” and accordingly shall be re-submitted to Publisher under this Section 2.5.

	
            Section 3.
 	
            Red Mile’s Scope of Work.
 

	
            3.1
 	
            Prosecution of Work.
 

	
             
 	
            (a)
 	
            Project Schedule. Red Mile will complete the Work in respect of the Developed Title in accordance with the milestones set forth in the applicable Project Schedule and the project management procedures implemented by Publisher. Time is of the essence in respect of Red Mile meeting the milestones in clause 8.2(a), (b), (c) and (d). Red Mile shall perform the Work as expeditiously as is consistent with the skill and care required for the orderly progress of the Work, and Publisher agrees to cooperate and provide such information and assistance as Red Mile may reasonably request in connection with the Work and Red Mile shall provide Publisher with a list of Publisher Materials required from Publisher for Development of the Game [specified in Schedule X] (“Development Publisher Materials”). To
the extent that Red Mile reasonably believes that Publisher has failed to deliver the respective Development Publisher Materials or perform any activity as contemplated by the Agreement or the Project Schedule, and that such failure will affect Red Mile’s time of performance, Red Mile shall so inform Publisher in writing providing five (5) business days to deliver such materials or perform such activity. Thereafter, Red Mile shall notify Publisher of the schedule change, provided that such schedule change shall directly correlate with the length of the delay caused by Publisher and/or its licensors as evidenced by reasonable proof.
 

	
             
 	
            (b)
 	
            Standard of Care. The standard of care for all Work performed or furnished by Red Mile will be of the highest standards of quality of care and skill, commonly accepted within the entertainment software industry for high quality computer and video game software products.. Red Mile acknowledges that Publisher is relying on the expertise, skill and knowledge of Red Mile to perform the Work. Red Mile represents that it possesses expertise, skill and knowledge qualifying it as an expert in performing the Work and holds, or will obtain at its expense, any consents, licenses, permits, registrations or authorizations necessary to perform the Work including having the status of a licensed 
 

 

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Sony Playstation 2 Developer and a licensed Microsoft Xbox Developer during the Term. Red Mile will maintain sufficient personnel and resources at all times to perform its obligations in accordance with the terms of this Agreement.

	
             
 	
            (c)
 	
            Progress Reports. Red Mile agrees to provide to Publisher on a bi-weekly basis a written report of the progress of the Work. Such update shall describe the status of work, including the status of each Developed Title, any anticipated problems (resolved or unresolved), projections of the time of completion including any possible delays in the Project Schedule. In addition, upon written request by Publisher, Red Mile shall furnish to Publisher such evidence as Publisher may reasonably require relating to Red Mile’s ability to perform its obligations under the Agreement.
 

	
             
 	
            (d)
 	
            Notice of Delay. Without prejudice to Publisher’s rights hereunder, Red Mile agrees to notify Publisher immediately and in no event later than five business (5) days of learning of any event that may affect Red Mile’s ability to meet the requirements of any Work, or that is likely to cause any material delay in delivery of a Developed Title. Such notice shall be given in the event of any loss or reassignment of Key Personnel, threat of strike, or major equipment failure.
 

	
             
 	
            (e)
 	
            Incorporation of Publisher’s Trademarks; EULA. Red Mile shall include Publisher’s legal notices and logo in the installer of the Developed Title and in such other places (and in such manner) as Publisher (in its absolute discretion) determines. Red Mile shall insert its own legal notices and logo. Red Mile shall also incorporate Publisher’s end user license agreement (EULA) into the Developed Title.
 

	
            3.2
 	
            Additional Obligations
 

	
             
 	
            (a)
 	
            Customer Materials. Red Mile shall provide information deemed reasonably necessary by Publisher to create “user guides,” “strategy guides,” or customer support materials for the Developed Title. Red Mile shall also provide screen shots, team biographies, demonstration builds, and “E3” and press builds of the Developed Title to Publisher at Publisher’s request, together with such other materials Publisher may reasonably request to market and sell the Developed Title. Details of such information and assets and the relevant times for delivery of such materials to Publisher are specified in Schedule D. Publisher shall be solely responsible for customer support and assistance to end users of the Developed Title and may, at its discretion, operate customer support
telephone lines during Publisher’s normal business hours to respond to end user inquiries and problems. Red Mile shall update information provided hereunder from time to time as reasonably requested by Publisher. Red Mile shall provide reasonable and prompt consultation to Publisher in the event that Publisher is unable to use the customer support materials to solve any problems presented by end users of the Developed Titles. In addition, Red Mile shall maintain a high-quality website for the Developed Title throughout the Term of this Agreement and shall coordinate with Publisher to ensure consistency with the marketing of the Developed Title in cooperation with Publisher’s website for the Game.
 

	
             
 	
            (b)
 	
            Localization. Red Mile will ensure that the Source Code and/or Object Code shall be localizable, and shall create modular Source Code and/or Object Code data files for all text/copy or language files as well as all voice/dialogue files. Codemasters will provide localized text and voice/dialog files for the Product in Spanish, French, German and Italian. If, Publisher’s requires additional languages, Publisher shall be responsible for 
 

 

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providing all localized text and voice files. Red Mile shall integrate such files and produce a new Gold Master.

	
             
 	
            (c)
 	
            Bug Fixes. Red Mile shall, by its own action or upon the request of Publisher, First Party and/or Publisher’s licensors, provide at Red Mile’s cost updates, revisions, or fixes to the Developed Title resulting from bugs, errors or incompatibilities in the Developed Title in a manner that allows Publisher to provide the same to end users. Publisher and Red Mile shall mutually reasonably determine the advisability, method and timing of distributing all bug fixes, updates and upgrades in accordance with industry standards.
 

	
             
 	
            (d)
 	
            Site Visits. Red Mile shall, from time to time and upon reasonable notice, allow access to its premises by Publisher or its designee for purposes of design reviews, “walkthroughs” and discussions concerning the status and conduct of work being performed. In the event that there is any delay in completion of any portion of the Work (including, without limitation, delays in the completion of any Deliverable) which is likely, in Publisher’s reasonable opinion, to cause a material delay in the timely completion of the Developed Title, Publisher shall have the right to designate representatives to monitor the Work on a daily basis, and Red Mile shall allow access to its premises by such representative during normal business hours.
 

	
             
 	
            (e) 
 	
            Pan European Game Information (“PEGI”). Red Mile shall deliver the Developed Title with game play, graphics, story and script sufficient to earn a PEGI rating of no older than 12+.    
 

	
             
 	
            (f)
 	
            Insurance. Red Mile shall at all times during the Term and for two (2) years thereafter, obtain and maintain at its own expense, from a qualified insurance carrier, first and third party insurance, including, without limitation, code and contractual liability coverage. The amount of coverage shall not be less than the $1,000,000 combined single limit for each single occurrence for personal injury, bodily injury, intellectual property and/or property damage. If requested, Red Mile shall furnish Publisher with a certificate of insurance evidencing such insurance no later than ten (10) days after the execution of this Agreement.
 

	
             
 	
            (g)
 	
            Additional Assets. Except as expressly provided otherwise herein, Red Mile shall bear all costs and expenses associated with creating, licensing or acquiring scripts, artwork, animation, sounds (including voiceovers), musical compositions, audio-visual effects (including, special effects), motion capture and all other Intellectual Property incorporated in the Developed Title. Publisher shall have the right at any time to require that Red Mile furnish evidence of its right to use and exploit any Intellectual Property incorporated into the Developed Title, and Red Mile’s failure to do so within fifteen (15) days after Publisher’s request therefore shall constitute a material default hereunder.
 

	
             
 	
            (h)
 	
            Employees and/or Subcontractors. Red Mile shall obtain and maintain in effect written agreements with each of its employees and/or subcontractors who participate in any of Red Mile’s Work hereunder. Such agreements shall contain terms sufficient for Red Mile to comply with all of its obligations hereunder (including, without limitation, confidentiality obligations) and to support all grants and assignments of rights and ownership hereunder, and shall not contain any terms that conflict with the terms of this Agreement. 
 

 

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            3.3
 	
            Costs. Except as expressly provided otherwise herein, Red Mile shall bear all costs and expenses arising from its performance of its obligations under this Agreement.
 

	
            Section 4.
 	
            Approvals and Acceptance.
 

	
            4.1
 	
            Deliverables.
 

	
             
 	
            (a)
 	
            With respect to each Developed Title, Red Mile shall deliver all Deliverables for each milestone outlined in the Project Schedule to Publisher for review and acceptance. Publisher shall commence acceptance testing following its receipt of each Deliverable and shall use reasonable efforts to promptly complete such testing (in addition to any time required to obtain approvals from the applicable First Party). Upon completion of such testing, Publisher shall issue to Red Mile a notice of acceptance or rejection of the Deliverable. Publisher may only reject based on the Developed Title not meeting the agreed upon specifications. In the event of rejection, Publisher shall give its reasons for rejection in reasonable detail to inform Red Mile of the extent of the corrective measures that are required. Red Mile shall use its best
efforts to correct any deficiencies or Non-Conformities in the Work and resubmit the Deliverables no more later than fourteen (14) business days following delivery of the notice of rejection for further testing.
 

	
             
 	
            (b)
 	
            Publisher shall have the right (but not the obligation) to terminate each Developed Title with respect to which Red Mile has re-submitted more than two iterations of any Deliverable that attempt to correct any matters previously identified by Publisher with respect to such Developed Title. 
 

	
            4.2
 	
            Testing. Play testing and compatibility testing shall be conducted by Codemasters. If a third party testing service is retained by Codemasters to perform such testing, then Codemasters shall be liable for all expenses related to such third party testing.
 

	
            4.3
 	
            Approval by Publisher. Certain approvals by Publisher may be contingent upon approvals from the applicable First Party and, in such instances, Publisher’s time for approval shall be extended to include as much additional time as Publisher shall require to obtain such First Party’s approval or disapproval.
 

	
            4.4
 	
            Approval by First Party. Red Mile hereby acknowledges and agrees that its rights hereunder and this Agreement is contingent upon the First Party’s requirements, among others, that Red Mile is and will remain a licensed developer that has signed a valid and current licensed developer agreement with First Party. Red Mile further agrees to comply with First Party’s approval procedures and guidelines. Red Mile shall provide Publisher such assistance, materials, or cooperation as deemed necessary by Publisher to obtain approvals from First Party. In the event of disapproval by First Party, Red Mile shall make all such changes as are required or necessary to obtain approval, and Red Mile shall be responsible for the costs of such changes.
 

	
            4.5
 	
            Red Mile Credit. Red Mile’s and IR Guru’s name and logo shall appear in a reasonable size and location on the back of packaging, all printed materials, and advertising provided (i) Publisher will not be obliged to include the Red Mile’s logo alongside all occurrences of the Publisher’s logo (ii) such credit is permitted by all relevant First Party licensors who have rights of approval in respect of the Game; and (iii) such credit is in accordance with the software and packaging guidelines adopted by such First Party licensors.
 

 

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            4.6
 	
            Approval by Red Mile. Publisher shall reasonably consult with Red Mile about the “look and feel” of the packaging, advertising campaign, and other significant marketing materials, provided that Publisher’s decision shall be final as to such matters.
 

	
            Section 5.
 	
            Financial Terms.
 

	
             
 	
            5.1
 	
            Development Advances. Provided that Red Mile is not in default hereunder and subject to adjustment as provided in this Agreement, Publisher will pay to Red Mile development advances in respect of the Developed Title as follows:
 

 

	
             
 	
            Upon signing this Agreement
 	
            xxxxxxx
 	
             

	
             
 	
            Upon receipt of PS2 Gold Master
 	
            by Publisher $ xxxxxxx
 	
             

	
             
 	
            Upon receipt of Xbox gold master
 	
            by Publisher xxxxxxx
 	
            xxx
 	
             

	
             
 	
            Upon receipt of P.C. Gold Master
 	
            by Publisher xxxxxxx
 	
            xxx
 
											

All Development Advances paid to Red Mile shall be deemed to constitute royalty advances that are recoupable in full by Publisher from Royalties otherwise payable to Red Mile hereunder prior to any Royalties being payable to Red Mile in respect of sales of the Developed Title. All payments of the Advances will be made within 15 days of receipt of a valid invoice. 

	
            5.2
 	
            Royalties. 
 

	
             
 	
            (a)
 	
            Royalties. Publisher shall pay to Red Mile royalties (“Royalties”) in respect of Net Revenue in the Territory of the Developed Title as follows. After all Development Advances have been repaid in full from Net Revenues otherwise payable to Red Mile hereunder (i.e., Red Mile’s percentage of Net Revenues), Red Mile shall earn Royalties on Net Revenues of units of the Developed Title equal to xxxxxxxx) percent of Net Revenue. For the avoidance of doubt, royalties earned for the Developed Title across platforms shall be cross-collateralized for the purpose of recouping the Development Advances.
 

	
             
 	
            (b)
 	
            Payment. Royalties under Section 5.2(a) shall accrue with respect to the Developed Title when monies are actually received by Publisher for a sale of units of such Developed Title. Within  twenty (20) days after the end of each calendar quarter, Publisher will send Red Mile a statement describing the calculation of such quarter’s Royalties in reasonable detail and shall wire transfer any amounts due to Red Mile’s bank account. All payments under this Agreement will be made in the lawful currency of the United States. Following the receipt of each statement referred to above, Developer shall send Publisher an invoice in respect of the royalties shown by the statement to be due to Developer. Publisher shall pay that royalty to Developer within 15
days of receiving an appropriate invoice from Developer.
 

	
             
 	
            (c)
 	
            Termination
 

	
             
 	
            (i)
 	
            If Red Mile fails to submit a Gold Master (a) for the PS2 and Xbox platforms respectively by 24th June 2005or (b) for the PC format by 5th August 2005, the Publisher shall be entitled, (subject to clause 5.2(c)(ii) below), without prejudice to any other rights or remedies it may have, to terminate this 
 

 

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Agreement and to require Red Mile to refund to the Publisher all monies paid by the Publisher under this Agreement. 

	
             
 	
            (ii)
 	
            If Red Mile breaches its obligations under clause 5.2(c)(i) above and is able to demonstrate to the Publisher that such breach is due to a failure of the Publisher to deliver localised assets of the Developed Titles to Red Mile within 15 Business Days of signature of this Agreement, Publisher will grant Red Mile a pro rata extension of the Milestones for delivery of the Gold Masters, corresponding to the time delay in providing such localised versions. If Red Mile is still unable to submit the Gold Masters after such extension, Publisher will be entitled to rely upon the remedies set out in clause 5.2(c)(i) above. 
 

	
            5.3
 	
            Pricing. Publisher shall have sole discretion (acting in a commercially reasonable manner taking into account, among other things, the quality of the Developed Title and the prevailing market conditions) in respect of (i) setting prices applicable to the distribution and sale of the Developed Title, including but not limited to wholesale price, dealer price, direct sales consumer price, and (ii) all mark-downs, price protection and any other discounting arrangements with respect to the Developed Title.
 

	
            5.4
 	
            Returns; Reserve Allowance.
 

	
             
 	
            (a)
 	
            Returns. During the Term hereof, units of the Developed Title shipped by Publisher may be returned to Publisher by its customers (“Customer Returns”). In connection with each Customer Return, in the month such Customer Returns are received, Publisher shall be entitled to deduct from amounts payable to Red Mile pursuant to this Agreement the Royalty previously paid by Publisher for such Customer Returns (“Return Amount”). Reimbursements for Customer Return shall be made as follows: (i) in each payment period, Publisher shall deduct the amount of the aggregate Return Amount for all Customer Returns from the total amount otherwise owed to Red Mile during the period; or (ii) if no amount is owed to Red Mile for such period, or the amount owed to Red Mile for such period is less
than the Return Amount owed by Red Mile for such Customer Returns, Publisher shall notify Red Mile of the Return Amount due for such Customer Returns and Red Mile shall pay Publisher such Return Amount within thirty (30) days of notification.
 

	
             
 	
            (b)
 	
            Reserve. In each payment period, Publisher may withhold amounts as a reserve (the “Reserve”) for all allowable deductions (including without limitation Customer Returns, credits for price protection, rebates, cost of goods, marketing costs, marketing development fund and First Party royalties) in connection with the distribution and sale of each Developed Title not to exceed (20%) percent of the gross sales for such applicable period. Such reserve shall be liquidated every six months. That is, any reserve taken in the first reporting quarter, not used by the third reporting quarter shall be paid concurrent with any Royalties due for the third reporting quarter; provided further, that any accumulated Reserves remaining at the end of the applicable Developed Title’s sell-off period shall
be liquidated as such time. In the case where Publisher has ceased distributing the Developed Title, Publisher shall liquidate the reserve no later than ninety days after such cessation. For the avoidance of doubt, if the Publisher takes the Developed Title off its Price list, it shall have been deemed to have ceased selling the Developed Title. The Royalty statement will reflect 
 

 

12

 

 

the Reserve balances. Notwithstanding the foregoing, Publisher may withhold from payments of royalties due to Red Mile any overpayment that Publisher has made under this Agreement, a proportional reduction in respect of any withholding taxes or other similar amounts which have been deducted from payments to Publisher in respect of the Game and any other sums that Red Mile may owe to Publisher under this Agreement. 

	
            5.5
 	
            Records.
 

	
             
 	
            (a)
 	
            Records and Audit. Publisher shall maintain accurate books and records relating to all payment, shipment and distribution activities to be carried out by Publisher pursuant to this Agreement. Such books and records shall be in sufficient detail so as to allow for verification of the payments made by Publisher and Publisher’s compliance with the terms hereof. Red Mile may, at its expense, appoint a representative to audit such books and records but solely for the purpose of verifying Publisher’s compliance with the terms hereof and the accuracy of payments and statements. Such audit shall occur during normal business hours upon at least thirty (30) days prior written notice to Publisher, but no more frequently than once a year, not later than two (2) years after the date the
disputed Royalties statement was rendered, and not during the first ten (10) days of any quarter. Any costs associated with any audit shall be borne by Red Mile unless there is a discrepancy of more than five percent (5%) between amounts actually paid and amounts actually owed, in which case Publisher shall bear the reasonable, documented costs of such audit.
 

	
             
 	
            (b)
 	
            Statements. Each Royalties statement rendered by Publisher pursuant to this Agreement will be conclusively binding on Red Mile and not subject to any objection unless Red Mile gives Publisher specific notice of Red Mile’s objection to such statement and its reasons for such objection within twenty four months after the date such Royalties statement was rendered.
 

	
             
 	
            (c)
 	
            Audit. Any representative engaged by Red Mile to conduct an audit pursuant to this Section shall (i) not be paid on a contingent fee basis; (ii) keep secret and confidential all information received by it from Publisher; and (iii) upon written request from Publisher, and at Publishers expense, deliver to Publisher a copy of its audit report and related work papers simultaneously with its delivery of such report and papers to Red Mile.
 

	
            5.6
 	
            Product Samples.
 

	
             
 	
            (a)
 	
            Samples. Publisher shall deliver 50 units of each Developed Title on each platform to Red Mile promptly upon their initial shipment to customer(s). All such units provided to Red Mile as described above shall be completely free of charge to Red Mile (other than shipping costs). Red Mile may not resell such units or otherwise distribute such units to the general public.
 

	
             
 	
            (b)
 	
            No Royalty. Publisher shall not be obligated to pay Red Mile any royalties for units of a Developed Title given or sold to Red Mile, Publisher’s licensors or the First Party. 
 

	
            6.
 	
            Proprietary Rights.
 

 

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            6.1
 	
            Ownership Rights to the Intellectual Properties. As between Red Mile and Publisher, Red Mile retains ownership of all intellectual property rights in and to the Developed Titles, and any other material provided by Red Mile to Publisher, and any Derivative Work of any thereof. This Agreement only grants to Publisher a license to manufacture and transfer Units to Publisher’s customers, and does not transfer any right, title, or interest in or to the Developed Titles to Publisher. Notwithstanding any “purchase” or “sale” or similar language contained herein, Publisher acknowledges that the Developed Titles are licensed as indicated in this Paragraph 6.1. As used herein, “Derivative Work” means: (i) without limitation, any improvement, supplement, modification, alteration,
addition, revision, enhancement, new version, new edition, remake, sequel, translation, adaptation, design, plot, theme, character, story line, concept, scene, audio-visual display, interface, element or aspect, in any medium, format, use or form whatsoever, whether interactive or linear and whether now known or unknown (including but not limited to sound recordings, phonorecords, computer-assisted media, games, books, magazines, periodicals, merchandise, animation, home videos, radio, motion pictures, cable and television), that is derived in any manner, directly or indirectly, from any Red Mile Developed Titles or any part or aspect of any thereof, (ii) any adaptation of any Red Mile Developed Titles, or any part or aspect of any thereof, in accordance with  the Copyright Designs and Patents Act 1988 (the “Copyright Law”).
 

	
            6.2
 	
            Subject to the terms and conditions of Section 2 hereof, Publisher shall acquire no right under this Agreement to use the names “ Red Mile “, “IR Gurus” or, “Heroes of the Pacific” (either alone, in conjunction with or as a part of any other word, name or phrase), (1) in any advertising, publicity or promotion or other disclosure, (2) in any in-house publication, (3) to express or imply any endorsement of any product or service, or (4) in any other manner or for any purpose whatsoever (whether or not similar to any of the foregoing).Except as specifically and clearly granted herein, it is understood that Red Mile is not granting to Publisher, and Publisher does
not acquire, by the operation of this Agreement or otherwise, any right to, or interest in, the names “ Red Mile “, “IR Gurus”, “Heroes of the Pacific” or any derivation of any of them, any Red Mile Developed Titles or any other intellectual property of Red Mile.
 

	
            6.3
 	
            Red Mile shall provide Publisher with appropriate notices of copyright in Red Mile’s name, and Publisher shall place, in such a manner as Red Mile shall direct, such copyright notices on all Units.
 

	
            6.4
 	
            Publisher acknowledges that the rights and powers retained by or granted to Red Mile under this Agreement are necessary to protect Red Mile’s intellectual property rights and, specifically, to conserve the goodwill and good name of its Developed Title and the names “Red Mile” and “IR Gurus”, and therefore Publisher agrees that it will not, and it will not allow or assist any third party to, perform any act or omit from performing any act, that would result in Red Mile’s Developed Title or the name “ Red Mile “ or “IR Gurus” to become involved in matters that will or could detract from, or impugn, their public acceptance and popularity.
 

 

14

 

       

       

       

 

 

	
            6.5
 	
            If Publisher utilizes the services of any third party in the course of performing its obligations under this Agreement it will procure the assignment of any such rights generated in performing such services to Publisher. 
 

	
            6.6
 	
            Ownership Rights in Source Code. Red Mile shall own and shall retain ownership of the Source Code. Source Code shall not include any Intellectual Property Rights owned and/or controlled by Publisher or Publisher’s licensors. 
 

	
            6.7
 	
            Assignment. Publisher agrees (at Red Mile’s cost) to sign any and all relevant papers which may be reasonably required to effectuate the rights delineated in Section 6 hereof or to protect Red Mile’s interests in the Developed Titles, or the Intellectual Property Rights embodied therein, and hereby irrevocably appoints Red Mile as its attorney-in-fact (coupled with an interest) to take such actions and to make, sign, execute, acknowledge and deliver all such documents as may from time to time be reasonably necessary to convey to Red Mile all rights granted herein.
 

	
            6.8
 	
            Protection of Proprietary Rights. Publisher agrees to give prompt written notice to Red Mile of (i) any activity of a third party that may infringe upon Red Mile’s Intellectual Property Rights in the Developed Title, and (ii) any legal proceeding instituted, or written claim or demand asserted by, any third party with respect to the infringement of any Intellectual Property Right alleged to have resulted from the license, sale or use of the Developed Title. Publisher agrees to cooperate and assist Red Mile, at Red Mile’s expense and upon reasonable request, in taking action to prevent, remedy or respond to such activities or claims.
 

	
            Section 7.
 	
            Representations and Warranties; Indemnification.
 

	
            7.1
 	
            Red Mile.
 

	
             
 	
            (a)
 	
            General. Red Mile represents and warrants that it is (i) duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and that it has the full rights, power, legal capacity and authority to enter into the Agreement and to carry out the terms hereof; and (ii) the Agreement has been executed by its duly authorized representative and is a valid, legally binding and enforceable obligation of Red Mile.
 

	
             
 	
            (b)
 	
            First Party Requirements. Red Mile represents and warrants that Red Mile or IR Gurus (i) is and shall remain during the Term hereof a licensed developer that has entered into a valid and current developer agreement with the First Party; (b) Red Mile and IR Gurus shall comply with the First Party’s development requirements, procedures and other applicable guidelines; and (iii) Red Mile and IR Gurus will enter into any other agreements required by the First Party, now or in the future, to develop products for the Platforms.
 

	
             
 	
            (c)
 	
            Original Works. Red Mile represents and warrants that (i) it is and will be the sole author or Publisher of all Work prepared for the Developed Title; (ii) Red Mile has procured all rights and licenses from the owners of such rights necessary for Red Mile to enter into 
 

 

15

 

 

and carry out the terms of the Agreement; (iii) the Developed Title has not been sold, assigned, leased, licensed or in any other way disposed of or mortgaged, pledged or encumbered in a manner that would violate the license granted to Publisher hereunder, and that it is under no contractual or other legal obligation which would interfere in any material way with the full, prompt, and complete performance of its obligations pursuant to the Agreement; (iv) no consent of any person or entity not a party to the Agreement is required or necessary for Red Mile to carry out its obligations hereunder; (v) there is no litigation, claim or proceeding of any nature pending or threatened against or relating to the Developed Title or any Intellectual Property Rights related thereto which would have any material adverse effect on the rights granted to Publisher hereunder; and (vi) neither the
Developed Title, nor any of the Deliverables, nor the use of the Developed Title or such Deliverables in the manner specifically authorized hereunder, nor the grant of the rights under the Agreement, is or will be an infringement of or otherwise in violation of the rights of any third party in the Territory, including, without limitation, the Intellectual Property Rights.

	
             
 	
            (d)
 	
            Legal Conformity. Red Mile will comply in all material respects with all applicable laws, statutes and regulations in performing its duties under the Agreement.
 

	
             
 	
            (e)
 	
            Conformity, Performance and Compliance. Red Mile represents and warrants that (i) the Developed Title shall be prepared in a workmanlike manner and with professional diligence and skill; (ii) that the Developed Title will function on the machines/Platforms and with operating systems for which they are designed; (iii) the Developed Title will correspond to and perform in all material respects in accordance with the written materials provided by Red Mile; and (iv) the Developed Title will be safe for use and operate without Non-conformity and will not contain any viruses, worms, date bombs, time bombs, or other code designed to cause the Developed Title to cease operating or to damage, interrupt, or interfere with any customer’s and/or Publisher’s hardware, software or data. Red Mile
guarantees to Publisher that for a period of time of two (2) years from the first shipment date of the Developed Title, any material defect for which Publisher gives Red Mile notice (whether such defects are observed before or after acceptance of the Developed Title and/or Gold Master) shall be promptly corrected by Red Mile according to the terms of Sections 3.2(a) and 3.2(c) hereof. Notwithstanding the forgoing, nothing shall be construed to establish a period of limitation with respect to Red Mile’s other obligations under the Agreement and the foregoing relates only to the specific obligation of Red Mile to correct the Developed Title and has no relationship to the time within which the obligation to comply with the Agreement may be sought to be enforced, nor to the time within which proceedings may be commenced to establish Red Mile’s liability with respect to Red Mile’s
obligations other than correction of the Developed Title.
 

	
             
 	
            (f)
 	
            Promotional Materials; No Affect On Project Schedule. Red Mile acknowledges that under Section 3.2, and other provisions of this Agreement, Red Mile will be obligated to provide a reasonable number of demonstration and “press” builds of the Developed Title, as well as other materials from the Developed Title (such as screen shots) to promote such titles, and that receiving such items are a material part of Publisher’s effort to market the Developed Title effectively. Accordingly, Red Mile represents and warrants to Publisher that (i) it will provide all such items as and when reasonably required hereunder, or if no such time period is so specified under this Agreement, on a prompt basis after request therefore by Publisher, (ii) Red
Mile’s Project Schedule for each 
 

 

16

 

 

Developed Title takes into account having to provide such items, and (iii) providing such items shall not affect Red Mile’s Project Schedule for the Developed Title.

	
             
 	
            (g)
 	
            If Red Mile  breaches of any of the representations, warranties or covenants set out in this Clause 7.1 then Publisher may (without prejudice to any other remedies the Publisher may have under this Agreement) withhold payments due to the Developer and apply such sums in settlement of any claim relating to such infringement. 
 

	
            7.2
 	
            Publisher.
 

	
             
 	
            (a)
 	
            General. Publisher represents and warrants that (i) it is duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and that it has or will have, at all pertinent times, the full rights, power, legal capacity and authority to enter into this Agreement, and to carry out the terms hereof; (ii) this Agreement has been executed by its duly authorized representative and is a valid, legally binding and enforceable obligation of Publisher.
 

	
             
 	
            (b)
 	
            Original Works. Publisher represents and warrants that (i) Publisher shall be either the owner of the Publisher Materials and all Intellectual Property Rights therein or shall procure all necessary rights and licenses from the owners of such rights to enter into and carry out the terms of the Agreement; (ii) Publisher is under no contractual or other legal obligation which would interfere in any way with the full, prompt, and complete performance of its obligations pursuant to the Agreement; (iii) no consent of any person or entity not a party to the Agreement is required or necessary for Publisher to carry out its obligations hereunder; (iv) there is no litigation, claim or proceeding of any nature pending or threatened against or relating to the Publisher Materials or any Intellectual Property
Rights related thereto which would have any material adverse effect on the rights granted to Red Mile hereunder; and (e) none of the Publisher Materials is or will be an infringement of or otherwise in violation of the rights of any third party in the Territory.
 

	
             
 	
            (c)
 	
            Legal Conformity. Publisher will comply in all material respects with all applicable laws, statutes and regulations in distributing the Developed Titles and in performing its duties under this Agreement.
 

	
            7.3
 	
            Indemnification.
 

	
             
 	
            (a)
 	
            Red Mile. Red Mile hereby agrees to indemnify, defend and hold harmless Publisher and its officers, directors, shareholders, employees, agents and affiliates, against any and all suits, losses, liabilities, damages, awards, claims, settlements, costs and expenses, including reasonable attorneys’ fees, arising out of or otherwise relating to a claim, lawsuit, or other proceeding by a third party, whether actual or alleged, based upon: (i) any material breach by Red Mile of the Agreement; (ii) any material breach by Red Mile of the warranties, representations and covenants contained in the Agreement, (iii) any trademark, copyright, or patent infringement claim, action, or proceeding relating to any Developed Title or any other claim, action, or proceeding alleging misappropriation or
unauthorized use of trade secrets, name and likeness, right of publicity, or similar claim arising in connection with the content of any of the Developed Titles, or (iv) any product liability claim or other claim, action, or proceeding alleging damage or injury to persons or property arising out of any of the Developed Titles.
 

 

17

 

       

       

       

 

 

	
             
 	
            (b)
 	
            Publisher. Publisher hereby agrees to indemnify, defend and hold harmless Red Mile and its officers, directors, shareholders, employees, agents and affiliates, against any and all suits, losses, liabilities, damages, awards, claims, settlements, costs and expenses, including reasonable attorneys’ fees, arising out of or otherwise relating to a claim, lawsuit, or other proceeding by a third party, whether actual or alleged, based upon: (i) any material breach by Publisher of the Agreement; (ii) any material breach by Publisher of the warranties, representations and covenants contained in the Agreement; or (iii) any trademark, copyright, or patent infringement claim, action, or proceeding relating to Publisher’s Materials. 
 

	
             
 	
            (c)
 	
            Procedure. Promptly after receipt of notice of the commencement of any action, the indemnified party will notify the indemnifying party in writing of the commencement thereof. Upon receipt of such notice from the indemnified party the indemnifying party shall assume and control the defense of such action with counsel of its choice. Subject to such control by the indemnifying party, the indemnified party shall have the right to participate in the defense of any action and to be represented by counsel of its own selection in connection therewith and to be fully and completely informed by the indemnifying party and its counsel as to the status thereof at all stages of the proceedings therein, all at the indemnified party’s cost and expense. The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section, but the omission so to notify the indemnifying party will not relieve him of any liability that he may have to any indemnified party otherwise than under this Section. The indemnifying party shall not settle any action without the consent of the indemnified party, which consent shall not be unreasonably withheld. 
 

	
            Section 8.
 	
            Term and Termination.
 

	
            8.1
 	
            License Period; Term. The license granted hereunder in respect of the Developed Title ( “License Period”) shall commence on the date of the first shipment thereof and shall continue for a period of five (5) years, unless extended by mutual agreement of the parties or earlier terminated as provided in this Section 8; provided however, that Publisher shall have the right, by sending written notice to Red Mile, to extend the term of this Agreement for any Red Mile Delay and for any Force Majeure Event which impairs Red Mile’s performance of its obligations on a timely basis. The term of this Agreement (the “Term”) shall commence on the date of execution of this Agreement, and shall continue until the expiration date of the License
Period hereunder, unless extended by mutual agreement of the parties or earlier terminated as provided in this Section 8.
 

	
            8.2
 	
            Publisher Termination for Cause. In addition to any other rights and remedies such party may have at law or in equity, Publisher may terminate this Agreement by written notice to Red Mile at any time prior to expiration of the Term or any extension thereof upon the occurrence of any of the following:
 

	
             
 	
            (a)
 	
            in the event Red Mile fails to deliver a Gold Master in accordance with clause 5.2(c).  
 

(b)    Red Mile breaches any representation or warranty set forth herein and such breach, if reasonably susceptible to cure, is not cured within thirty (30) days after written notice from Publisher; or

 

18

 

       

       

       

 

 

(c)    Red Mile defaults with respect to any other material term or condition to which Red Mile is subject under this Agreement and such default, if reasonably susceptible to cure, is not cured within a period of thirty (30) days after written notice from Publisher;  or

	
             
 	
            (d)
 	
            Red Mile becomes insolvent, files or has filed against it a petition under any bankruptcy law (which, if involuntary, is unresolved after 30 (thirty) calendar days), proposes any dissolution, liquidation, composition, financial reorganization, or recapitalization with creditors, makes an assignment or trust mortgage for the benefit of the creditors, or a receiver trustee, custodian, or similar agent is appointed or takes possession with respect to any property or business of such party.
 

	
            8.3
 	
            Red Mile Termination for Cause. In addition to any other rights and remedies such party may have at law or in equity, Red Mile may terminate this Agreement by written notice to Publisher at any time prior to expiration of the Term or any extension thereof upon the occurrence of any of the following:
 

(a)    Publisher fails to make a Development Advance to Red Mile as and when due and such default is not cured within a reasonable period of time not to exceed fifteen (15) days after written notice from Red Mile; or 

(b)    Publisher breaches any representation or warranty set forth herein and such breach, if reasonably susceptible to cure, is not cured within thirty (30) days after written notice from Red Mile; or

(c)    Publisher defaults with respect to any other material term or condition to which Publisher is subject under this Agreement and such default, if reasonably susceptible to cure, is not cured within a period of thirty (30) days after written notice from Red Mile;  or

(d)    Publisher becomes insolvent, files or has filed against it a petition under any bankruptcy law (which, if involuntary, is unresolved after 30 (thirty) calendar days), proposes any dissolution, liquidation, composition, financial reorganization, or recapitalization with creditors, makes an assignment or trust mortgage for the benefit of the creditors, or a receiver trustee, custodian, or similar agent is appointed or takes possession with respect to any property or business of such party;

	
             
 	
            (e)
 	
            Notwithstanding the foregoing, the parties agree that a good faith disagreement as to the amount of any payments due under the Agreement will not be considered a material breach of the Agreement,.
 

	
            8.4
 	
            Termination Without Cause. Publisher may terminate this Agreement for its convenience effective upon delivery of 30 days written notice to Red Mile. In the event of termination under this Section 8.4, Red Mile shall be entitled retain any Development Advances received. 
 

	
            8.5
 	
            Effect of Expiration or Termination. The parties agree that in case of any expiration or early termination of any License Period under, or the Term of, this Agreement:
 

	
            (a)
 	
            No Further Obligations. Except as otherwise set forth in the Agreement, in the case of an expiration of the Term, the parties shall have no further obligations with respect to the Agreement.
 

 

19

 

       

       

       

 

 

	
            (b)
 	
            Sell-Off Period. Publisher shall, without delay, cease all production of the applicable Developed Title and within thirty (30) days following the effective date of expiration or termination, Publisher shall provide Red Mile with a complete written inventory of units of the Developed Title in Publisher’s possession or control. Publisher may continue to sell the inventory of the Developed Title pursuant to the terms and conditions of the Agreement for six (6) months after the effective date of termination or expiration.
 

	
            (c)
 	
            End Of Sell-Off Period. At the end of the sell-off period outlined above, all applicable licenses granted to Publisher shall cease and Publisher will destroy all copies of the applicable Developed Title in its possession or under its control; provided that Publisher shall be permitted to retain twenty copies for distribution internally to Publisher employees and for the purpose of providing technical support to end users, if such technical support is required by Publisher. For the avoidance of doubt, any license solely to use a version of the Game granted by Publisher to any end user/customer of a version of the Game shall remain in force in accordance with the terms of such sub-license.
 

	
            (d)
 	
            Red Mile’s Obligations. Red Mile shall not, nor shall Red Mile permit or suffer any third party claiming rights by, through, or under Red Mile to, interfere with Publisher’s rights to sell-off Publisher’s unsold inventory of the Developed Title during the Sell-Off Period, including Red Mile or such third party contacting retailers to secure orders during such Sell-Off Period or notifying such retailers that Publisher’s rights have expired or that the rights to such Developed Title have been or are being re-licensed. 
 

	
            Section 9.
 	
            Miscellaneous.
 

	
            9.1
 	
            Confidentiality. 
 

	
             
 	
            (a)
 	
            Each party agrees to use the same care that it uses to protect its own Confidential Information, but in no event shall such care be less than reasonable care, to prevent unauthorized dissemination and disclosure of the other party’s Confidential Information during the Term hereof and for a period of three (3) years after the expiration or termination of the Agreement. For purposes hereof, “Confidential Information” includes the confidential and proprietary information of the applicable party, including: (i) the design, computer object and source code, technology elements and know-how related to the Developed Titles; (ii) non-public information concerning either party’s financing, financial information, research and development, proposed new products, release plans, product revenues, marketing plans and
pricing, unless and until publicly announced; and (iii) any information designated by either party as confidential or proprietary in writing.
 

	
             
 	
            (b)
 	
            Confidential Information shall not include any information that: (A) becomes known to the general public without fault or breach on the part of the receiving party; (B) the disclosing party customarily provides to others without restriction on disclosures; (C) the receiving party receives from a third party without breach of a nondisclosure obligation and without restriction on disclosure; (D) was in the possession of the receiving party prior to disclosure by the other; and (E) is independently developed by the receiving party’s personnel having no access to similar confidential information obtained from the other. 
 

	
             
 	
            (c)
 	
            The receiving party shall, upon the request of the disclosing party, promptly return to the disclosing party or destroy all records (“Records” shall include tapes, disks and drawings 
 

 

20

 

 

and all other documents, records and other tangible manifestations and all copies or reproductions thereof) containing the Confidential Information furnished to receiving party by or on behalf of the disclosing party, and all Records, and all copies and reproductions thereof, which were created by or for receiving party and contain, evaluate or are based on any of the Confidential Information. Notwithstanding any other provision or term limit contained herein, any Confidential Information that is not returned or destroyed, including, without limitation, any oral Information, shall remain subject to the confidentiality obligations of the Agreement.

	
             
 	
            (d)
 	
            Nothing in this Agreement shall prevent the receiving party from disclosing information to the extent the receiving party is legally compelled to do so by any governmental or judicial agency; provided however, that prior to any disclosure, the receiving party shall (i) immediately notify the disclosing party in writing of any such order and (ii) cooperate fully with the disclosing party in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of the compelled disclosure and protecting its confidentiality.
 

	
            9.2
 	
            Relationship of the Parties. Nothing in the Agreement shall be construed to create the relationship of employer or employee, master and servant, principal and agent, franchiser and franchisee, partner or joint venturers between the parties hereto. Red Mile shall be deemed an independent contractor at all times with respect to its performances hereunder, and shall have no right or authority, whether express or implied, to assume or create or purport to assume or create, any obligation in the name of or on behalf of Publisher. Nothing whatsoever contained herein shall give or is intended to give any rights of any kind to any third person except as agreed herein. 
 

	
            9.3
 	
            Force Majuere. Neither party will be responsible for any failure to perform due to causes beyond its reasonable control (each a “Force Majeure Event”), including, but not limited to, strikes, riots, terrorist activities, embargoes, war, invasion, acts of civil or military authorities, fire, floods, explosion, earthquakes, accidents, delays in carriers, acts of God, and all other delays beyond the party’s reasonable control, provided that such party gives prompt written notice of such Force Majeure Event to the other party within ten (10) business days. The time for performance will be extended for a period equal to the duration of the Force Majeure Event, but in no case longer than thirty (30) business days. 
 

	
            9.4
 	
            Assignment. Either party may assign its rights under this agreement with the express written consent of the other, such consent not to be unreasonably withheld. 
 

	
            9.5
 	
            Notices. Any notice required to be given pursuant to the Agreement shall be in writing and personally delivered, mailed by certified or registered mail, return receipt requested (postage prepaid), or delivered by an international overnight express service such as Federal Express, or by confirmed facsimile transmission to the parties at the addresses set forth below (as the same may be changed upon written notice to the other party):
 

 

 

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            Developer:

 

RED MILE ENTERTAINMENT, INC.

Tel.: (415) 339-4245

Fax: (415) 339-4249

Attention: CFO

 
 	
            Publisher:

 

Codemasters

 

 
 

Any notice or report given by mail shall be deemed given on the earlier to occur of actual receipt or the fifth day following mailing. Any notice or report given by Federal Express or similar overnight delivery service shall be deemed given on the next business day following delivery of the notice or report to such service with instructions for overnight delivery. Any notice or report given by confirmed facsimile transmission shall be deemed given when placed in regular mail on the day of such facsimile transmission.

	
            9.6
 	
            Waiver. The failure or refusal by either party to insist upon the strict performance of any provision of his Agreement or the exercise of any right in any one or more instances shall not be construed as a waiver or relinquishment of such provision or right, nor shall such failure or refusal be deemed a custom or practice contrary to such provision or right.
 

	
            9.7
 	
            Governing Law.This Agreement shall be governed by and construed in accordance with the laws of England and subject to the exclusive jurisdiction of the English courts. 
 

	
            9.8
 	
            Severability. In the event that any provision of the Agreement or the application of any provision shall be held by a court or other tribunal of competent jurisdiction to be unlawful or unenforceable, the remaining provisions of the Agreement shall remain in full force and effect and shall be construed so as to give the fullest effect to the intent of the parties, as expressed herein.
 

	
            9.9
 	
            Survival. Obligation of the parties under this Agreement that by their nature are intended to continue beyond the termination of this Agreement shall survive the expiration or sooner termination of this Agreement (including, without limitation, Section 2.5, Section 7.1, Section 7.2, Section 7.3, and Section 9.1).
 

	
            9.10
 	
            Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INCIDENTAL, EXEMPLARY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR THE LOSS OF ANTICIPATED PROFITS INCURRED OR SUFFERED BY THE OTHER PARTY ARISING FROM ANY BREACH OF THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGES AND REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL PURPOSE. NOTWITHSTANDING THE FOREGOING, PROVISIONS OF THIS SECTION SHALL NOT BE CONSTRUED AS LIMITING THE EXTENT OR APPLICABILITY OF ANY INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS AS SET FORTH IN THIS AGREEMENT, NOR RED MILE’S LIABILITY FOR USE OF THE CHARACTERS OR PROPERTY IN CONTRAVENTION OF THE TERMS OF THIS AGREEMENT.
 

	
            9.11
 	
            Headings and Presumptions. The headings of the sections and sub-sections of the Agreement are provided for convenience only and will not be used to limit or construe the contents of the Agreement. As the Agreement is a negotiated agreement reviewed by each party’s legal counsel and there will be no presumption for or against one party on the ground that the other party was responsible for preparing the Agreement or any part of it.
 

 

22

 

       

       

       

 

 

	
            9.12
 	
            Multiple Counterparts. The Agreement may be executed in several counterparts, all of which taken together shall constitute one single Agreement between the parties.
 

	
            9.13
 	
            Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof and supersedes all prior agreements (including, the Binding Term Sheet), understandings, negotiations and discussions, whether oral or written, of the parties. There are no representations, warranties, terms, conditions or other agreements, express or implied, oral or written, statutory or otherwise, between the parties in connection with the subject matter of this Agreement, except as specifically set forth herein and therein. This Agreement may only be amended, modified or supplemented by a written agreement signed by both parties hereto.
 

	
            9.14
 	
            Effectiveness.      Notwithstanding anything to the contrary in this Agreement or any course of conduct or course of dealing between the parties or any exchange of drafts with respect hereto, the parties shall not be deemed to have entered into an agreement, contract, or other understanding with respect to the subject matter of this Agreement in the absence of a written agreement duly signed by both parties hereto. 
 

EXECUTED AS AN AGREEMENT

 

	
            Red Mile:

 

 

 

 

By:     /s/ Edward Roffman___________

Name:

Title:
 	
            Publisher:

 

THE CODEMASTERS SOFTWARE

COMPANY LIMITED

 

By:     /s/ David
Darling                            

Name:

Title:
 

 

 

 

23Exhibit 10.5

 

DATE  January 21, 2005 

 

 

 

(1)   RED MILE ENTERTAINMENT, INC

 

(2)   IR GURUS INTERACTIVE

 

 

 

SOFTWARE DEVELOPMENT AND LICENSING

AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

	
             
 	
            THIS AGREEMENT is made on  
 	
            January 21, 2005
 

 

BETWEEN:

 

	
            (1)
 	
            Red Mile Entertainment, Inc., a Florida Corporation (“the Publisher”) whose principal address is 4000 Bridgeway, Suite 101, Sausalito., CA 94965; and
 

 

	
            (2)
 	
            IG Gurus Interactive Pty Ltd, an Australian corporation whose principal address is Level 1, 96 Pelham Street, Carlton, Victoria 3053, Australia (the “Developer” or “Licensor”) 
 

 

	
            (A)
 	
            The Developer has completed an Alpha Version and is in the process of completing a Beta Version of an interactive entertainment game for the Initial Machines provisionally entitled “Heroes of the Pacific” (“Product”).
 

 

	
            (B)
 	
            The Developer has agreed to exclusively license certain rights to the Product on the terms and conditions of this Agreement.
 

 

AGREEMENT

 

	
            1.
 	
            DEFINITIONS
 

 

	
            1.1
 	
            In this Agreement:
 

 

“Acceptance Date” in relation to any Gold Master means the date on which it is accepted unconditionally under paragraph 4.5;

 

“Affiliate” means any corporate entity that controls, is controlled by or is under the common control of a party to this Agreement;

 

“Alpha Version” means the Version of the Product that is written by or for the Developer that is a playable version of the Product containing substantially all features of the Product, as specified in the Specification with all software modules integrated and working together in a usable and testable fashion. The Alpha Version is expected to undergo further test and revision for levels, design tuning and elimination of possible Product Errors. Some assets may be placeholders for purposes of this Version and this Version may not include software theft protection, and title and legal screens. It also includes a draft of the User Manual and any Supporting Documentation reasonably requested by the Publisher to allow complete feature and functionality testing.

 

“Beta Version” means the Version of the Product that is written by or for the Developer that is a complete running software Product containing ALL FEATURES of the Product and final-quality game assets, as specified in the Specification plus the incorporation of improvements, corrections and any other errors identified through testing of the Alpha Version of the Product. The Beta Version is a Version which is 

 

2

 

 

ready for Publisher to do its quality assurance testing and Developer is ready to fix Errors which may be found by Publisher during its “QA” testing and will include all Original Language assets and be Multi Byte Language compatible. It also includes such information and user instructions that the Publisher reasonably and requires to finish producing a User Manual in the Original Language;

 

“Conversion” means the preparation of a Product which involves the adaptation or conversion of a Version into a new Version for use on a Machine other than the Initial Machine;

 

“Co-Publisher” means a licensee with whom Publisher shares to a substantial degree the costs of publishing the Product in a part of the Territory, as opposed to a licensee who bears all of those costs alone and “co-publishing” shall be interpreted accordingly

 

“Delivery Date” means the relevant Milestone Date specified for delivery of the Gold Master of each Version;

 

“Developer Trademark(s)” means Developer’s trademark or trade name or art work used in conjunction therewith to identify Developer’s software development business and/or the trademarks and/or trade names and/or artwork used in conjunction therewith;

 

“End User” means anyone who is the ultimate user of any Product;

 

“Error” means any known material defect relevant to an End User in a Product including:

 

	
             
 	
            (a)
 	
            any failure to run the test procedure set out in the Specification;
 

 

	
             
 	
            (b)
 	
            any inability to perform repeatedly without interruption, loss of data or erroneously or improperly formatted output;
 

 

	
             
 	
            (c)
 	
            any misspelled incorrect text;
 

 

	
             
 	
            (d)
 	
            any non-compliance of any Product with any part of the Specification;
 

 

“Gold Master” means:

 

	
             
 	
            (a)
 	
            a non-copy protected and non-encrypted final gold master of a Product for use on an Initial Machine in such physical medium which (i) is sufficiently complete and correct to be released into the final manufacturing process in preparation for commercial release and shipment, in its Original Language and Translations in executable form; and (ii) is accepted for manufacturing and distribution by any applicable third-party licensor whose approval is contractually required prior to manufacturing and distribution of the Version for that Initial Machine. The Gold Master shall be the Beta Version with incorporation of any final improvements 
 

 

3

 

 

and correction of any Product Errors found in the testing of any and all elements of the Beta Version;

 

	
             
 	
            (b)
 	
            a copy protected final Gold Master of the Version referred to in (a) in its Original Language and related Translations recorded in executable form; and
 

 

	
             
 	
            (c)
 	
            in the case of (a) and (b), any necessary supporting software and data including all graphics and sound files.
 

 

“Hardware Manufacturers” means Sony Computer Entertainment and Microsoft Corp. 

 

“Initial Machines” means the Sony PS2, Microsoft Xbox and P.C. for which the Product will be developed by the Developer under this Agreement;

 

“Intellectual Property Rights” means, without limitation, all present and future rights of copyright, patent, registered designs, design rights, trademarks and trade names, neighboring rights or rights analogous to any of the above under any jurisdiction, in each case registered or unregistered and existing now or in the future, including reversions and renewals of such rights and rights to make applications for registration of any such rights and Intellectual Property Rights shall include in particular all rights in any jurisdiction to copy, adapt, translate, broadcast, transmit, publish, perform, reproduce in any medium and otherwise exploit the work or materials concerned;

 

“Machine” means an object or system of any description, now known or coming into existence in the future, with which a Product may be viewed, played or otherwise used;

 

“Milestone” means each stage of development of the Product set out alongside a Milestone Date in Schedule 1;

 

“Milestone Date” means each of the dates for achieving a Milestone in Schedule 1;

 

“Milestone Payment” means each of the Development Advance payments set out in respect of a Milestone in Schedule 1;

 

“Minimum Guarantee” means any payments made by Publisher to Developer whether at the commencement of this Agreement or by installments during the course of the development of the Product under this Agreement;

 

“Multi Byte Character” means a character or single text letter whose character code consists of two or more bytes under a certain character-encoding scheme.

 

“Multi Byte Languages” means software code that supports Multi Byte Character represented text and characters for one dialect of the Japanese language to be 

 

4

 

 

determined by the parties in connection with the preparation of Translations (as defined below).

 

“Net Sales Receipts” means gross sales less: (i) customary trade cash quantity discounts not to exceed 10% of gross sales, (ii) returns and allowances (including price protection credits), (iii) reasonable deductions for costs incurred in the manufacture of the product, (iv) royalties payable to 3rd party licensors including console manufacturer charge and fees, (v) reasonable marketing costs not to exceed 15.0% of gross sales and (vi) any value added taxes included in gross sales. Net Sales in foreign currencies will be deemed converted into United States Dollars at the rate reported in the Wall Street Journal for the last United States business day of the quarter, or on such other reasonable and fair exchange rate Publisher and Developer may mutually agree.

 

“Net Royalty Receipts” means any funds received by or credited to Publisher for a sub-license where the Publisher is paid a net amount per unit sold and Publisher has no direct marketing responsibility.

 

“Original Language” means American English. 

 

“Product” means the software Product currently known as “Heroes of the Pacific” to be produced by the Developer under this Agreement in respect of the Initial Machine and comprising each stage as existing from time to time:

 

	
             
 	
            (a)
 	
            the Product plots, themes, story lines, characters and sequences;
 

 

(b)   all revised, amended and rejected prototypes and materials prepared in connection with the development of the Product;

 

(c)    all Object Code, graphics, sound effects and music and implementing copy protection routines in each of the Versions;

 

“Product Names” means all names of characters, scenes, themes, products, sets, processes or other aspects of the Product and all designs of characters, backgrounds and other visual features appearing in the Product;

 

“Product Title” means “Heroes of the Pacific” or such other title for the Product as may be mutually determined by Publisher and Developer;

 

“Project Manager(s)” means the person at Developer responsible for the project management of Product; 

 

“Publisher’s Producer” means the person at Publisher responsible for the project management of Product and identified in Schedule 2;

 

 

5

 

 

 

“Quarter End” means 31 March, 30 June, 30 September and 31 December each year during the Term;

 

“Royalties” means the amounts in US Dollars payable by the Publisher to the Developer in accordance with paragraph 7 of this Agreement;

 

“Royalty Statement” means the statement of Royalties provided by the Publisher to the Developer under this Agreement;

 

“Source Code” means all software code and listings (excluding the Developer’s Tools and Technology) generated by the Developer in human readable form in order to create any Version of the Product, together with accompanying sound code, Product notes, flow charts, diagrams, written script of text, audio track and other documentation relating to such code;

 

“Specification” means the specification for each Version of the Product current from time to time comprising a detailed specification of all game features, mechanics, game structure and technical specifications of the Product;   

 

“Supporting Documentation” means documentation in English containing full and clear information enabling the Publisher and its licensees to support and maintain all aspects of the Product;

 

“Term” will mean beginning on the date shown on page one of this Agreement and ending three years hence. At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional three months (“Sell-off Period”) beyond the term. Royalties for sales of Products during the Sell-off Period shall be paid and remitted in accordance with Paragraph 7.

 

“Territory” means the universe;

 

“Translation” means a copy of a Version in which text and/or text related graphics and/or dialogue have been translated into French, German, Italian, Spanish, Dutch and one dialect of Japanese, in accordance with paragraph 6 hereof;

 

“Unit” means a copy of a Version embodied in a medium or format (whether tangible, electronic or otherwise) which is customarily made commercially available to the public;

 

“User Manual” means a manual containing instructions for End Users clearly expressed and enabling them to operate the Product fully, in a style suitable for the intended age range of End Users;

 

 

6

 

 

 

“Version” means a form of the Product produced by the Developer under this Agreement designed to be compatible with a particular Initial Machine and (where relevant) a particular screen format PAL/NTSC including all prototypes and all Master Copies of that Version, and when used in connection with the name of a Machine shall mean a form of the Product readable and executable on that Machine;

 

“Virus Free” means that at the time of delivery, the Product shall not contain any known computer Product (detectable by the McAfee anti-virus software current at that time) which copies itself to other storage machines including magnetic tape cassette, memory chip, electronic cartridge, optical disk and magnetic disk and which destroys data, causes damage or creates a nuisance or annoyance to the End User.

 

“Working Day” means Monday to Friday except for all public holidays observed in the United States or Australia;

 

	
            1.2
 	
            As the context permits, references to people include any legal entity, and partnerships or unincorporated associations, references to the singular include the plural and vice versa, and references to any gender include each other gender.
 

 

	
            1.3
 	
            “Include” or “including” are used without limitation.
 

 

	
            1.4
 	
            Headings and titles are used for reference only and do not affect the interpretation of the Agreement.
 

 

	
            1.5
 	
            Any reference to any paragraph or schedule is a reference to a paragraph or schedule in this Agreement.
 

 

	
            2.
 	
            PROPRIETARY RIGHTS.
 

 

	
            2.1
 	
            Publisher’s Rights. Publisher acknowledges and agrees that, the intellectual property rights in the Product and Gold Master shall be the sole and exclusive property of Developer. Publisher’s sole rights shall be those granted elsewhere in this Agreement.
 

 

	
            2.1.1
 	
            Other versions of the Product. Developer, as owner of the intellectual property known as Heroes of the Pacific, shall decide whether or not to create other video game versions of the Product. Fluent shall have the right of first refusal on reasonable commercial terms to publish any other version of the Product. Under this Agreement other versions include all video game formats know known, including PSP and DS, and their successors (i.e., PS3 is a successor to PS2) and the P.C. The parties agree to negotiate in good faith the terms under which Publisher would publish such products. If the parties are unable to negotiate an agreement within 30 days of Developer noticing Publisher of its desire to create other versions, Developer shall be free to negotiate with other publishers. Prior to completing an agreement with another Publisher,
Developer shall offer the Product to Publisher on the same terms and conditions as agreed to with 
 

 

7

 

 

 

the other publisher. Publisher shall have ten (10) days to elect to match the offer or lose its rights to the other version(s). 

 

	
            2.1.2
 	
            Sequels of the Product. Publisher shall have the first right of negotiation for the next sequel to the Product. (For sake of clarity, Fluent has this right for the first sequel. If Publisher and Developer agree to terms for the first sequel, Fluent will have such rights for the second sequel, and so on. Once Fluent has lost the right to a particular sequel, it has lost the right to all future sequels.)  If the parties are unable to negotiate an agreement within 30 days of Developer noticing Publisher of its desire to create a sequel, Developer shall be free to negotiate with other publishers. Prior to completing an agreement with another Publisher, Developer shall offer the Product to Publisher on the same terms and conditions as agreed to with the other publisher. Publisher shall have ten (10) days to elect to match the offer or lose
its rights to the sequel and all future sequels. 
 

 

	
            2.2
 	
            Developer’s Intellectual Property Rights. 
 

(a) Notwithstanding anything else contained herein, Developer will retain exclusive ownership and control of all of the Intellectual Property Rights in or relating to the Product. Developer hereby grants to Publisher a royalty-bearing, worldwide, exclusive license to: (i) sell copies of the Product in the format delivered to Publisher by Developer only (excluding without limitation the right to modify the Product or exploit it in source code format or in connection with any other product); and (ii) sublicense such rights to sublicensees. 

 

(b)For the avoidance of doubt Publisher shall not (and shall not authorize any third party to) (i) decompile, disassemble or otherwise reverse engineer the source code or underlying algorithms of the Product. This paragraph 2.2(b) shall not apply to software code delivered by Developer to Publisher in accordance with paragraph 6 provided that Publisher shall not use any such code for any purpose other than in order to create Translations.

 

	
            3.
 	
            DEVELOPMENT
 

 

	
            3.1
 	
            The Developer shall develop the Product for the Initial Machines and in the Original Language(s) in accordance with the Specification. Developer will provide or obtain at its sole cost and expense all necessary programming (including, without limitation, the application of technical knowledge, expertise and the services of personnel) and other production materials required to develop the Product.
 

	
            3.2
 	
            The Developer shall achieve each of the Milestones by the relevant Milestone Date (Publisher to provide reasonable assistance to Developer in respect of meeting the relevant Milestone). On achieving each Milestone, the Developer shall, if requested to do so by the Publisher, deliver to the Publisher all materials relevant to the particular Milestone including in particular copies of the User Manual and Support Documentation with each Alpha and Beta Version. In addition, Publisher may request 
 

 

8

 

 

Developer deposit Source Code with a mutually agreed upon Escrow Agent in Australia. Publisher shall pay all fees of Escrow Agent. Under the terms of such escrow arrangement, Publisher may request release of the source code from escrow, only if Developer fails to perform such translations or refuses to create them and fails to cure such default as required by paragraph 6.2, below.

 

	
            3.3
 	
            The Developer shall keep the Publisher promptly and regularly informed of all developments, problems, new concepts and ideas in relation to the Product.
 

 

	
            3.4
 	
            The Developer shall appoint a Project Manager who shall liaise with the Publisher during development of the Product.
 

 

	
            3.5
 	
            The Developer shall be responsible for initial testing on each Version prior to delivery in accordance with customary testing procedures. The Developer shall prior to delivery correct Errors discovered as a result of that testing, and also (in accordance with the procedure set out in paragraph 5 below) any Errors notified to the Developer by the Publisher following the Publisher’s testing of any Alpha or Beta Versions, or other Product materials supplied before delivery of the Alpha Version, Beta Version and the Gold Master.
 

 

	
            3.7
 	
            Developer shall be responsible for submitting the Gold Master candidate to the Hardware Manufacturers for approval within five (5) days of receiving the Gold Master approval from the Publisher. Developer and Publisher shall work together to obtain approval of the Gold Master candidate from the Hardware Manufacturers. Should the Gold Master candidate be rejected by either Hardware Manufacturer and such rejection is not due to the acts or omissions of Publisher, and the Developer and Publisher together are unable to correct such deficiencies and obtain approval of the Gold Master by Hardware Manufacturer, Publisher or Developer may terminate this Agreement in accordance with Paragraph 13.2.
 

 

	
            4.
 	
            DELIVERY AND ACCEPTANCE
 

 

	
            4.1
 	
            Developer shall submit to Publisher a Version of the Product at each Milestone for approval. Publisher shall (acting reasonably) review the submission for compliance with the relevant parts of the Specification at that Milestone and for Publisher’s continued awareness as to the Product status.
 

 

	
            4.2
 	
            As soon as reasonably practicable, but in any event within 10 (ten) business days following receipt of a Version of the Product at each Milestone, Publisher’s Producer shall notify the Developer in writing that:
 

 

	
             
 	
            4.2.1
 	
            it accepts and approves that Version unconditionally; or
 

 

	
             
 	
            4.2.2
 	
            it accepts and approves that Version conditionally on correction of the Errors specified; or
 

 

9

 

 

 

 

	
             
 	
            4.2.3
 	
            it does not accept or approve that Version
 

 

and shall at the same time notify the Developer of the Errors that it is aware of which are contained in that Version which it has not accepted and approved unconditionally. Publisher shall accept and approve unconditionally each Version unless there is an Error in that Version. 

 

	
            4.3
 	
            If the Publisher has not have given the Developer such notice under paragraph 4.2 within the said 10 (ten) business days, that Version shall be deemed accepted. 
 

 

	
            4.4 
 	
            As soon as reasonably practicable, but in any event no later than 10 Calendar Days (or such other period as the parties may agree) after receiving notice of non-acceptance pursuant to paragraph 4.2, the Developer shall correct the specified Errors at its sole expense and deliver to the Publisher the corrected Version of the Product. Paragraphs 4.2, 4.3 and this paragraph 4.4 shall then apply again in respect of that corrected Version.
 

 

	
            4.5
 	
            The Developer shall deliver to the Publisher the Gold Master of each Version by the relevant Delivery Date. For the avoidance of doubt, Developer shall deliver a Gold Master for the Original Language Version of the Product and a multi-language Version for all agreed Translations as required by the Hardware Manufacturers, i.e., a US Gold Master for SCEA and one (1) multi-language Gold Master each for SCEE and for SCEI, respectively. The parties acknowledge that in the case of PS2 and XBox, the Hardware Manufacturers shall have the final right to accept or reject such Master. In the case of rejection, Developer shall respond as if such rejection was made by Publisher and shall respond to such rejection in accordance with this paragraph 4.
 

 

	
            5.
 	
            LICENSE
 

 

Developer hereby grants to Publisher, and Publisher hereby accepts, the exclusive right to manufacture, distribute, sell and market the Product in the Territory through any and all channels of distribution known now or created in the future during the Term of this Agreement. Subject as provided in this Agreement, the publishing of the Product including manufacturing, pricing, distribution, marketing, packaging and artwork shall be the responsibility of the Publisher. Publisher shall have the right, subject to approval of Developer, such approval not to be unreasonably withheld, to sublicense the rights licensed hereunder to third parties.

 

Notwithstanding the provisions of the above paragraph, Publisher represents that the initial suggested retail price (“SRP”) points for the Product produced pursuant to this Agreement will reflect the quality and standard of the Games of similar quality and genre. Publisher represents as to the SRP is a material term of this Agreement; and the SRP may require revision subject to market conditions. In the event that the Publisher reasonably deems a revision to the SRP is required, Publisher may make such change to the SRP (taking into account market conditions, the quality of the Product and the 

 

10

 

 

strength of the Product’s intellectual property), informing the Developer in writing of the reasons for such change.

 

	
            6.
 	
            TRANSLATION
 

 

	
            6.1
 	
            At its own cost, Developer shall be responsible for translating and integrating localized text and voice over material and generating a multi-language Gold Master(s) embodying the Translations at no additional charge, including multi-byte languages, as defined in Translations.  
 

 

	
            6.2
 	
            If the Developer fails to perform such translations or refuses to create them and fails to cure such default within thirty (30) days of receipt of notice from Publisher, Publisher may use a third party for the Translation, the Developer shall supply the Publisher with all Original Language text and/or text related graphics and/or dialogue featured in the relevant Version, to the extent not previously delivered. Developer shall recover the cost of any such translations out of royalties earned.
 

 

	
            6.3 
 	
            If pursuant to this Paragraph 6.2, the Publisher uses a third party to carry out the Translation, the Publisher will sign, and will ensure that its chosen third party signs, a confidentiality undertaking reasonably specified by the Developer which will include, without limitation, undertakings that the Source Code, and any other material, information, data or other things of the Developer will not be used by the persons signing for any purpose other than the development of the Translation and that all such things will be held securely at all times and returned to the Developer when work on the Translation is complete. Developer shall deliver to Publisher any additional work (including part of the Developer’s Tools and Technology) which is necessary to the Publisher in order to complete a Translation. 
 

 

	
            7.
 	
            ROYALTIES
 

 

	
            7.1
 	
            The Publisher shall pay the Developer the following Royalties all of which are subject to recoupment of the Minimum Guarantee paid under Paragraph 8 (that is, the Minimum Guarantee regardless of which Version of the Product are cross-collateralized against all royalties earned under this paragraph 7): 
 

 

	
             
 	
            7.1.1
 	
            in respect of the use of the Products developed under this Agreement and published by Publisher (which shall include any Translation of the Product):  
 

	
             
 	
            (a)
 	
            until the minimum guarantee is fully recouped by the Publisher,  Publisher retains 100% of Net Sales Receipts; and
 

	
             
 	
            (b)
 	
            thereafter xxxxx of Net Sales Receipts. 
 

	
             
 	
            7.1.2
 	
            Schedule 4 details an example as to how the royalties will be calculated between the parties from Net Sales Receipts.
 

	
             
 	
            7.1.3
 	
            in respect of the use of the Products developed under this Agreement and co-published by Publisher (that is where Publisher has no direct marketing responsibility):  
 

 

11

 

 

 

	
             
 	
            (a)
 	
            until the minimum guarantee is fully recouped by the Publisher, Publisher retains 100% of Net Sales Receipts ; and
 

	
             
 	
            (b)
 	
            thereafter xxxxx of Net Sales Receipts. 
 

In the case where Publisher has no direct manufacturing and marketing responsibility, xxxxx will be used as cogs and xxxxx of the gross wholesale revenue will be used as the marketing spend. The third party royalty shall be based on the third party published royalty schedule.

 

	
            7.2
 	
            Within forty-five (45) days of the Quarter End following the date on which the Publisher first commercially releases a Version of the Product and of every subsequent Quarter End the Publisher shall provide the Developer with a written Royalty Statement specifying in sufficient detail (i) amounts spent in satisfaction of the Marketing Guarantee (as defined below) in respect of that quarter; and (ii) the calculations of Net Sales Receipts and Net Royalty Receipts, and the Royalty (if any) due to the Developer in respect of that quarter. Each Royalty Statement shall be accompanied by a wire transfer for any Royalty due, save that if the Publisher is prevented by the law of any country from making payments outside that country it shall be entities to pay the relevant sums to the Developer in that country. All sums payable to Developer pursuant to this Agreement
(including the Minimum Guarantee and Royalties) shall be made in U.S. Dollars. At each Quarter End the Publisher may retain from Royalties payable a reserve against returns or other credits in respect of Units sold by the Publisher hereunder in the manner set out in paragraph 7.2.1. 
 

 

	
            7.2.1
 	
            The Publisher will withhold a general reserve against rebates, deductions, price protection, discounts, allowances or refunds for returned, defective or discounted units, exchanges, credits and the like (the “General Reserve”) either:
 

7.2.1.1 where Publisher is responsible for the above described items, a reserve not to exceed Ten percent (10%) of gross sales, or 

 

7.2.1.2 where publisher is not responsible for the above described items, in a pro rata amount of any such reserve withheld by Publisher’s co-publishers or sub-licensees of the product. Such pro-rata amount shall be based on the applicable Royalty Rate in Paragraph 7.1. (For example, should a co-publisher withhold from Publisher $1,000 in payments which would fall under Paragraph 7.1.1 above, Publisher would withhold $350 from Developer in a reserve. When co-publisher releases Publisher’s reserve, Publisher will promptly release Developer’s reserve.) 

 

	
            7.2.2
 	
            In either case under Paragraph 7.2.1, such reserve shall be liquidated on a twelve month rolling basis. 
 

 

	
            7.3
 	
            Publisher will maintain accurate accounts, books and records that report the marketing, distribution and sales and other commercial exploitation of each Version of the Product which has been commercially released by the Publisher and any sub-licensing by the Publisher. Developer shall have the right to designate a certified public accountant (“the Auditor”) on Developer’s behalf to examine those accounts, books and records solely 
 

 

12

 

 

 

for the purpose of verifying the expenditures of the Marketing Guarantee and verifying the accuracy of the Royalty Statements under paragraph 7.2 and the Royalty payable under this Agreement. Developer’s Auditor may only make such examination during regular business hours and upon reasonable notice and in manner that is at the Publisher’s reasonable convenience and not disruptive to the Publisher’s business. Each examination will take place at the place the Publisher normally keeps the accounts, books and records to be examined, which is presently in Novato, California. Developer shall be limited to one such examination each 12 months while the Product is being commercially exploited and for 3 years thereafter. Publisher’s accounts, books and records relating to the Marketing Guarantee and to a particular Royalty Statement
may be examined only within 36 months after the date the Statement was rendered. Developer shall not have the right to examine Publisher’s accounts, books or records relating to a particular Royalty Statement more than three times. Prior to the commencement of any examination of the Publisher’s accounts, books and records under this Agreement, Developer shall cause the Auditor to sign a letter and/or agreement which acknowledges the confidentiality of the Publisher’s accounts, books and records in the form set out in Schedule 2. The fees of the Auditor shall be at the sole expense of Developer unless such audit discovers previously undiscovered errors in favor of Publisher exceeding both 5% and $2,500 for the entire time period covered by that audit, in which case the Publisher shall reimburse actual and reasonable Auditor’s fees for that audit to Developer in addition to make good the amounts of such errors and pay interest on such unpaid sums at the statutory
rate of interest under California law.

 

	
            7.4
 	
            Each Royalty Statement shall be final and binding on Developer unless Developer has given Publisher written notice of objection stating the matters to which it disagrees within 3 years of the issue of the Royalty Statements, and (if the Publisher does not accept any of those objections), unless the Developer has issued and served legal proceedings within 2 years of the date of the Developer’s relevant notice of objection.
 

 

	
            8.
 	
            MINIMUM GUARANTEE
 

 

	
            8.1
 	
            The Minimum Guarantee for the development of the Product in accordance with this Agreement shall be the relevant amount set out in Schedule 1 payable to the Developer in the separate Milestone Payments as set out in Schedule 1, each Milestone Payment being payable in accordance with the procedures set out in this Agreement, following acceptance under paragraph 5 above of the materials produced in respect of the corresponding Milestone. 
 

 

	
            8.2
 	
            Without prejudice to the provisions of paragraph 4 above, Publisher shall not unreasonably delay or withhold its acceptance of deliverables in relation to a Milestone.
 

 

	
            8.3
 	
            Developer may raise an invoice on the Publisher for the relevant Milestone Payment on delivery of the relevant Milestone. Payment of the invoice is due within ten (10) calendar days of the acceptance of the milestone.
 

 

 

13

 

 

 

	
            8.4
 	
            The Publisher shall have no obligation to make any payments to the Developer under this Agreement for anything save for the payment of the Minimum Guarantee referred to in this paragraph 8, Royalties under paragraph 7 and payments (if relevant) under paragraph 6. Nevertheless, any other additional payments that the Publisher, in its discretion, makes to the Developer in relation to the Developer’s work under this Agreement for any reason shall be treated as a further Minimum Guarantee payment and fully recoupable against Royalties payable under this Agreement, unless otherwise agreed in writing.
 

 

	
            8.5
 	
            All Minimum Guarantees paid by Publisher to the Developer together with payments (if relevant) under paragraph 6 (except payment of Royalties) shall be recoupable at the rate of 100% out of the Royalties payable under this Agreement.
 

 

	
            8.6
 	
            The parties agree that no finder’s fees are to any party under this transaction.
 

 

	
            9.
 	
            INDEMNIFICATION.
 

 

	
            9.1
 	
            Developer Indemnification. Subject to the provisions of paragraph 9.3 (Indemnification Procedures), Developer will indemnify, defend and hold harmless Publisher and its affiliates, officers, directors, employees and agents from and against any and all losses, liabilities, claims, obligations, costs and expenses (including, without limitation, reasonable attorneys’ fees) which arise in connection with any breach or alleged breach by Developer of any of its representations and warranties set forth in paragraph 11 (Warranties of Developer). Notwithstanding anything in this paragraph 9 to the contrary, in the event that, by reason of a claim by a third party of infringement based on the Product, Publisher is temporarily or permanently enjoined from distributing the Product developed under this Agreement, then, if Developer is unable,
within sixty (60) days from the signing of the order of injunction, to provide Publisher with a non-infringing Product, Publisher shall have the right to obtain a license from the third party to continue with the marketing, distribution and sale of the Product(s) and Developer shall reimburse Publisher for any reasonable license/settlement fee and related reasonable legal expenses paid by Publisher to the third party, unless Developer ultimately prevails in the litigation; if Publisher elects this remedy and obtains such a license, such remedy shall be Publisher’s sole and exclusive remedy in connection with such claim.. 
 

 

	
            9.2
 	
            Publisher Indemnification. Subject to the provisions of paragraph 9.3 (Indemnification Procedures), Publisher agrees to defend, indemnify and hold harmless Developer and its affiliates, officers, directors, employees and agents from and against any and all losses, liabilities, claims, obligations, costs and expenses (including, without limitation, reasonable attorneys’ fees) which arise in connection with the breach or an alleged breach by Publisher of any of its warranties set forth in paragraph 12(Warranties of Publisher). 
 

 

 

14

 

 

 

	
            9.3
 	
            Indemnification Procedures. If a third party asserts any claim or allegation which, if proven, would trigger the indemnification obligations set forth in paragraphs 9.1 and 9.2, the indemnifying party shall be notified promptly of such claim by the indemnified party and given control of the defense and/or settlement thereof. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this paragraph 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any
indemnified party is a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all such liability on claims that are the subject matter of such proceeding. Moreover Developer shall not, in the absence of the consent of Publisher (which shall not be unreasonably withheld or delayed), effect any settlement of any pending, threatened or actual proceeding or claim which has the effect of compromising in any way the rights, interests and licenses in the Product or the license granted to Publisher hereunder. The foregoing provisions of this paragraph 9 state the entirety of the parties’ obligations with respect to any claim by any third party.
 

 

	
            9.4
 	
            Developer shall procure and maintain for itself and its employees and contractors all insurance coverage required by Australian law. Developer also agrees to maintain general liability insurance, in the amount of at least AU$1,000,000. Upon request, Developer shall furnish Publisher with an up-to-date certificate of insurance evidencing such coverage.
 

 

	
            10.
 	
            MARKETING
 

 

	
            10.1
 	
            Publisher can replicate up to 1,000 Royalty-free Units for each Initial Machine for use including, but not limited to, promoting the game by sales and public relations and marketing teams on which no Royalty is payable to Developer. 
 

 

	
            10.2
 	
            The parties will work together to determine the optimal time and manner of announcing the Product and having the website “go live”. Developer will own, operate and maintain the “official” website for the Product and Publisher and Developer shall cooperate with each other on providing content for such website. 
 

 

	
            10.3
 	
            Publisher shall, subject to the terms of this Agreement and consistent with its own policies, practices and procedures, use commercially reasonable efforts to promote and exploit the Product throughout the Territory. Publisher agrees that it will release the Product in the United States and in Europe within four (4) months from the date that the Publisher accepts any Gold Master, unless the parties agree in good faith (acting reasonably) to delay the release of the Product. Publisher shall present a marketing plan to Developer no later than thirty days before the Product is to be released in each country or region of the world within the Territory for review and comment. Such plan 
 

 

15

 

 

shall include a sales forecast for the country or region. Publisher, or its co-publisher, shall spend a minimum of five percent (5%) of the expected Net Sales Receipts, based on the sales forecast, in each country or region (the “Marketing Guarantee”). For purposes of this Paragraph 10.3, marketing shall include promotion, advertising, including production of said advertising, publicity materials, retail trade advertising, point of sale materials, co-op allowances, print advertising, trade shows and television and radio advertising.

 

	
            10.4
 	
            Publisher shall furnish Developer without charge thirty (30) samples of each English language Version of the Product distributed hereunder, such samples not to be resold by Developer. Developer shall have the right to purchase additional units of the Product at Publisher’s cost therefore, such copies not to be resold or used for any advertising or promotional activities (except with Publisher’s prior written consent).
 

 

	
            10.5
 	
            Publisher shall present all marketing materials to Developer for review and approval, not to be unreasonably withheld. Developer shall have ten (10) days to approve or reject such materials. In the case where Developer does not respond within ten (10) days, the marketing materials are deemed approved.
 

 

	
            10.6
 	
            Publisher shall be responsible for setting the initial suggested retail price (SRP) and any subsequent changes to said SRP. Such pricing shall represent Publishers best efforts to properly price the Product taking into account, the perceived quality or the Product, the market and pricing of any competitive products. In the event that Publisher deems it necessary to change the SRP, Publisher shall inform Developer of such change and the reasons for such change.
 

 

	
            11.
 	
            WARRANTIES OF DEVELOPER
 

 

	
            11.1
 	
            The Developer represents and warrants that: 
 

 

	
             
 	
            (a)
 	
            it is and will at all material times own or control all Intellectual Property Rights in the Product, free from any third party right or interest which would impair the  rights of the Publisher under this Agreement; 
 

 

(b) it has and will at all material times have full power and authority to enter into and perform this Agreement and to grant the rights expressed to be granted by it;

 

	
             
 	
            (c)
 	
            nothing contained in the Product will infringe a third party’s Intellectual Property Rights, of a right of privacy or name or image or likeness, or become liable under unfair competition law;
 

 

(d)nothing contained in the Product will be obscene or libelous or otherwise in breach of any relevant laws or regulations of any territory which relates to health and safety;

 

 

16

 

 

 

	
             
 	
            (e)
 	
            each Gold Master will be Virus Free on its Acceptance Date and each Gold Master shall not contain any software routine designed to disable a computer Product automatically with the passage of time or by the intervention of a third party other than a licensee of the Gold Master or Publisher;
 

 

	
             
 	
            (f)
 	
            the Product will be an original work created by the Developer;
 

 

(g) the execution of this Agreement will not put the Developer in breach of any other agreement including an exclusive term agreement;

 

(h) the Developer has received no notice of any claim pending or threatened against Developer based on infringement of the rights set forth in this Agreement;

 

(i) the Developer has not sold, assigned, leased, licensed or in any other way disposed of or encumbered the rights granted to Publisher hereunder in such a way as to materially affect the rights granted to Publisher hereunder, and Developer will not sell, assign, lease, license or in any other way dispose of or encumber any of such rights in such a manner as to encumber the rights granted to Publisher hereunder;

 

(j) Developer will not use Publisher’s name or logos or the names of any of Publisher’s products for any purpose, including, but not limited to, advertising or promotional purposes, except as provided in this Agreement or with the prior written consent of Publisher.

 

	
            12.
 	
            WARRANTIES OF PUBLISHER
 

 

	
            12.1
 	
            The Publisher warrants and represents:
 

 

(a)        it has and will at all material times have full power and authority to enter into and perform this Agreement and to grant the rights granted;

 

(b)      nothing contained in this Agreement or in the performance of this Agreement will place Publisher in breach of any other contract or obligation.

 

(c)       Publisher does not know or have reason to know that anything Publisher provides that is or will be contained in the Product does or will violate or infringe any Intellectual Property Rights, whether statutory or common law of any third party in any jurisdiction, or contain any libelous or otherwise unlawful material;

 

	
             
 	
            (d)
 	
            Publisher has received no notice of any claim pending or threatened against Publisher based on infringement of the rights set forth in this Agreement; and
 

	
             
 	
            (e)
 	
            Publisher warrants that it has the financial ability to enter into and perform all its obligations under this Agreement.
 

 

 

17

 

 

 

	
            12.2
 	
            Disclaimer. EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES HEREBY DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
 

 

	
            13.
 	
            TERMINATION
 

 

	
            13.1
 	
            Either party shall be entitled, without prejudice to its other rights, to terminate the Agreement with immediate effect by giving written notice to the other party if the other party is in breach of any of its material obligations under this Agreement and, if the breach is capable of remedy, it has continued unremedied for a period of thirty calendar 30 days after the other party has been given written notice specifying the breach and the steps required to remedy it. Failure to pay any monies due under this Agreement and failure to release the Product within four (4) months of acceptance of each Gold Master, subject to adjustment as allowing clause 10.3 is a material breach and subject to cure under this Paragraph 13.1. In the case of a breach for non-release of the Product in a portion of the Territory, after the cure period, if the breach has not been cured,
the rights to the portion of the Territory in breach shall revert to Developer.
 

 

	
            13.2
 	
            If Sony Computer Entertainment of America or Microsoft Corp. reject the concept submittal for any reason, except due to Publisher’s act or omission, Publisher may cancel this agreement for the non-approved product and any Minimum Guarantee payments made under this Agreement to such date are fully and immediately refundable to the Publisher. 
 

 

	
            13.4
 	
            Either party shall be entitled, without prejudice to its other rights, to terminate the Agreement with immediate effect by giving written notice to the other party if the other party shall have a receiver or an administrative receiver or an administrator or liquidator appointed over it (except a liquidator appointed for the purpose of amalgamation or reconstruction) or shall pass a resolution for winding up or shall enter into any voluntary agreement with its creditors or shall become bankrupt or file for voluntary bankruptcy or anything analogous to any of the above under the law of any jurisdiction occurs in relation to such party. 
 

 

	
            13.6
 	
            If at any time, Developer is more than thirty days late delivering a Milestone, and such event is not due to the acts or omissions of Publisher, Publisher may Terminate this Agreement. In such case, as Publisher’s sole remedy, Developer shall return all Minimum Guarantee payments paid to such date.
 

	
            13.7
 	
            Developer may terminate this Agreement at any time prior to the Publisher paying the balance of the Minimum Guarantee by giving written notice to Publisher that Developer has selected another publisher to publish the Product. Termination pursuant to this clause will take effect from the date that the Developer has repaid any amounts (in full) paid to it by the Publisher pursuant to this Agreement. A notice of termination pursuant 
 

 

 

18

 

to this clause 13.7 will be invalid in the event that the opportunity has arisen as a result of the Publisher introducing the Product to the new publisher and such notice was given prior to 28 February 2005. 

	
            13.8
 	
            Subject to clauses 13.1, 13.4, 13.7 and 13.9, and notwithstanding any other provision contained in this Agreement, Developer cannot terminate this Agreement prior to US third party hardware manufacturer final approval (ready for release to manufacturing).
 

	
            13.9
 	
            In the event that Publisher does not pay the sum of xxxxx xxxxx  by 5pm Pacific Standard Time, 28 February 2005, Developer may immediately terminate this Agreement by written notice to Publisher. If this Agreement is terminated in accordance with this clause 13.9:
 

	
             
 	
            (a)
 	
            each party is solely responsible for all expenses (direct and indirect) that have been, or will be, incurred by them under this Agreement;
 

	
             
 	
            (b)
 	
            Publisher acknowledges and agrees that on termination of this Agreement pursuant to this clause 13.9, all intellectual property (if any) that vested in Publisher by virtue of this Agreement is immediately assigned to Developer;
 

	
             
 	
            (c)
 	
            the termination of this Agreement and any actions undertaken by the parties pursuant to this clause 13.9 shall be made without any admission of liability by either party and shall be in complete satisfaction of the each party’s respective obligations under this Agreement; and
 

	
             
 	
            (d)
 	
            in consideration of the representations detailed in this clause 13.9 each party forever releases and indemnifies the other (including all officers and directors) from all Claims. The term “Claims” includes all manner of actions, suits, causes of action, arbitration, debts, dues, interest, costs, claims, demands, verdicts and judgments whatsoever, in any jurisdiction, in any state or country, howsoever arising, that either party may now or in the future have against the other party arising out of or in connection with the Agreement. The term “Claims” also includes any claim howsoever arising, that either party may now or in the future have against the other party arising out of or in connection with any intellectual property rights detailed in Agreement
 

 

	
            14.
 	
            CONSEQUENCES OF TERMINATION
 

 

	
            14.1
 	
            Any termination of the Agreement shall not affect any accrued rights or liabilities of either party, nor any other rights of the terminating party in relation to the matter giving rise to the termination, nor shall it affect the coming into force or the continuance in force of any provisions of this Agreement which are expressly intended to come into or to continue in force on or after such termination. Termination of this Agreement by the Publisher under Paragraph 13 shall not affect any Version whose Acceptance Date has already occurred, and this Agreement shall continue to apply in all respects to any such Version.
 

	
            15.
 	
            CREDITS AND ARTWORK
 

 

 

19

 

 

 

	
            15.1
 	
            Publisher acknowledges that Developer’s Name and logo shall appear on a splash screen during the “boot-up” sequence of the Product, subject to approval of the Hardware Manufacturers. Subject to such approvals, whenever Publisher’s name and/or logo appears, Developer’s name and/or logo shall appear on the Product packaging, User Manuals, demo discs and self-playing demos, screenshots, and full-page print advertising, in approximately the same size of Publishers logo on the Product and in the credits of all Versions of the Product. In addition Developer may designate a reasonable number of persons to receive individual text credits in the Product whose names and capacities Developer shall submit to Publisher prior to final delivery of the Product. On Publisher’s request, Developer shall promptly supply Publisher with any
transparencies that might be required by it for the purposes of this paragraph. Publisher’s obligations under this paragraph are subject to the final approval of the applicable Hardware Manufacturer. An inadvertent failure by Publisher to include Developer’s name or logo shall not be a material breach of this Agreement, provided that Publisher shall cure any such failure on a prospective basis once Publisher has been notified of same.
 

 

	
            15.2
 	
            Developer shall supply Publisher on reasonable request (so as not to interfere with Developer’s efforts to complete and deliver the Product as contemplated hereunder) with any relevant materials it may have that may be useful to Publisher for artwork, packaging, merchandising, marketing and advertising including play through videos, demo discs, screenshots and graphics of characters.
 

 

	
            15.3
 	
            Publisher shall cause copyright, patent and trademark notices to appear on each unit of the Product (other than on screen notices, the production and placement of which shall be Developer’s responsibility) and on the back of the Product packaging and User Manual and advertising materials as may be designated and approved by Developer.
 

 

	
            16.
 	
            SUPPORT 
 

 

	
            16.1
 	
            The Developer shall at its sole expense correct any Errors in any Gold Master  which become apparent after that Gold Master has been accepted by the Publisher and which the Publisher notifies to the Developer, and shall carry out any other alterations to the Gold Master which the Publisher notifies the Developer are needed for any of the following reasons: to obtain the rating in the US from the ESRB as specified in the Specification; to obtain the approval of Hardware Manufacturers; or to ensure that the Product conforms with the Specification. The Developer shall start correction of Errors and making of alterations within 5 days of receiving the Publisher’s notice and shall rectify all Errors and make all alterations set out in the notice as soon as reasonably practicable thereafter. Developer’s obligations under this paragraph 6.1 in respect of
each Version shall terminate twelve (12) months after the initial commercial release of the Product pursuant to this Agreement.
 

 

	
            16.1.1
 	
            The parties shall work together so that the Product does not violate the guidelines for ratings issued by ESRB in the United States and ELSPA in the UK or censorship ratings in other countries in the Territory. In any case where the Product does not meet the 
 

 

20

 

 

guidelines, Developer shall be responsible at its own cost to promptly correct the Product. 

 

	
            16.2
 	
            From the date that the Publisher accepts any Gold Master, the Developer will provide technical support to the Publisher only (not to End Users under any circumstances) in respect of that Gold Master without further charge. This support will continue for a period of 7 calendar months from the date of first commercial release by Publisher and will be by means of e-mail and telephone on Working Days and during regular business hours, Melbourne Time. Developer will use reasonable endeavors to provide a service out of hours and on non-Working Days in the event of exigent circumstances. The support will be provided by a person with reasonable technical knowledge of the Product. Any questions that cannot be dealt with immediately will be responded to with reasonable promptness. Failure by Developer to provide such support shall not be a material breach of this
Agreement.
 

 

	
            17.
 	
            NOTICES
 

 

Any notice required or permitted by this Agreement shall be in writing and shall be given by fax (if confirmed by delivery of the hard copy as provided herein), courier or other personal delivery or by registered or certified mail at the appropriate address below or at a substitute address designated by notice by the party concerned:

 

	
            IR Gurus Interactive

Level 1, 96 Pelham Street, Carlton, Victoria 3053, Australia Attn:     Mike Fegan

 
 	
            Red Mile Entertainment.

4000 Bridgeway

Suite 101

Sausalito, CA 94965

Attention:  CFO

 

 
 
	
            Phone: 011 613 9347 5044

Fax: 011 613 9347 5233
 	
            Phone: 1 (415) 819-0919

Fax: 1 (415) 381-8111
 

                

Notices shall be deemed given when faxed (if confirmed by delivery of the hard copy as provided herein), delivered by a courier or, in the case of mail, upon receipt, with written notification of said receipt. 

 

	
            18
 	
            CONFIDENTIALITY
 

 

	
            18.1
 	
            Each party to this Agreement acknowledges that it will have access to proprietary or confidential information of the other party including, but not limited to, the terms of this Agreement, the documentation and materials produced in accordance with this Agreement, marketing information, manufacturing information, customer or client information and development techniques and know-how (“the Confidential Information”). During the Term of this Agreement, each party will regard and preserve 
 

 

21

 

 

as strictly confidential the Confidential Information and will not use the Confidential Information or disclose the Confidential Information to a third party other than is strictly necessary in order to fulfill an obligation under this Agreement.

 

	
            18.2
 	
            The obligations of confidentiality and non-use specified in paragraph 18.1 will not apply to any Confidential Information of one party which:
 

 

	
             
 	
            18.2.1
 	
            was known by the other party prior to the date of this Agreement and not obtained or derived, directly or indirectly, from such party or its Affiliates or if so obtained or derived, was lawfully obtained or derived and is not held subject to any confidentiality or non-use obligations;
 

 

	
             
 	
            18.2.2
 	
            is or becomes public or available to the general public otherwise than through any act or default of the other party or any breach of a confidentiality obligation to the disclosing party by a third party;
 

 

	
             
 	
            18.2.3
 	
            is obtained or derived prior or subsequent to the date of this Agreement from a third party which, to the best knowledge of the party acquiring such information, is lawfully in possession of such information and does not hold such information subject to any confidentiality or non-use obligations;
 

 

	
             
 	
            18.2.4
 	
            is independently developed by such party without use of the other party’s confidential information; or
 

 

	
             
 	
            18.2.5
 	
            is required to be disclosed by one of the parties pursuant to an applicable law or under a government or court order provided that:-
 

 

	
             
 	
            (a)
 	
            the obligations of confidentiality and non-use will continue to the fullest extend not in conflict with such law or order; and
 

 

	
             
 	
            (b)
 	
            if and when a party is required to disclose such Confidential Information pursuant to any such law or order, such party will give notice to the other party to allow such party to make efforts to obtain a protective order or take such other actions as will prevent or limit, to the fullest extent possible, public access to, or disclosure of, such Confidential Information.
 

 

	
            18.3
 	
            It is further understood and agreed that money damages would not be a sufficient remedy for any breach of either party’s obligations under this paragraph 18 by the other party, or any employees, consultants or other persons under the other party’s supervision and that the disclosing party shall be entitled to specific performance, including, without limitation, injunctive relief, as a remedy for any such breach. The parties agree that the damaging party shall reimburse the costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by the damaged party in connection with the enforcement of this Agreement.
 

 

22

 

 

 

	
            18.4
 	
            In the event of any termination or expiration of this Agreement, each party shall promptly return to the other party all Confidential Information of such other party in tangible form, the receiving party shall certify in a writing signed by an authorized officer or representative that the foregoing have been shredded and disposed of in a secure manner.
 

 

	
            19
 	
            GENERAL
 

 

	
            19.1
 	
            No addition to or modification of any provision of this Agreement shall be binding upon the parties unless made by written instrument signed by a duly authorized representative of each of the parties. Each party confirms it is not relying on any representation or commitment by the other in entering into this Agreement except as set out in this Agreement. This paragraph 19.1 shall not apply to any deliberate misrepresentations made before this Agreement was made.
 

 

	
            19.2
 	
            Developer may not assign this Agreement, nor delegate or subcontract any of its obligations hereunder, to any third party without the prior written consent of Publisher, which consent will not be unreasonably withheld; provided, however that Developer may assign its right to receive payments of the Minimum Guarantee and/or Royalties hereunder without the consent of Publisher. Publisher may assign this Agreement to a purchaser of the business of Publisher or substantially all the assets of the business without the consent of Developer, but save as aforesaid Publisher may not assign this Agreement, nor delegate or subcontract any of its obligations hereunder, to any third party without the prior written consent of Developer, which consent will not be unreasonably withheld. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the
parties, and their respective successors and permitted assigns.
 

 

	
            19.3
 	
            Neither party is the legal representative, agent, joint venturer, partner, or employee of the other party for any purpose whatsoever. Neither party has any right or authority to assume or create any obligations of any kind or to make any representation or warranty on behalf of the other party, whether express or implied, or to bind the other party in any respect whatsoever.
 

 

	
            19.4
 	
            No failure or delay by either party in exercising any right, power, or remedy under this Agreement shall operate as a waiver of any such right, power or remedy. No waiver or modification of any provision of this Agreement shall be effective unless in writing and signed by both parties. Any waiver by either party of any provision of this Agreement shall not be construed as a waiver of any other provision of this Agreement, nor shall such waiver operate as or be construed as a waiver of such provision respecting any future event or circumstance.
 

 

	
            19.5
 	
            If any provision or wording of this Agreement is held by a judicial authority having jurisdiction over the matter to be unlawful or unenforceable for any purpose, it shall be deemed excluded for that purpose and the rest of this Agreement shall remain in full 
 

 

23

 

 

 

force and effect. The parties will negotiate in good faith a valid and enforceable provision to replace the excluded provision as closely as reasonably possible.

 

	
            19.6
 	
            FORCE MAJUERE. In the event that either party is prevented from fulfilling its material obligations hereunder or said obligations are materially interfered with by reason of events of war, fire, flood, earthquake, explosion or other natural disaster, industrial action or any other reason beyond the reasonable control of that party, such obligation shall be delayed until it can be performed. The party claiming excusable delay must promptly notify the other party of such delay. If the delay continues for more than 45 days the other party may terminate this Agreement by giving 45 days prior written notice to the delaying party provided that the Agreement will not terminate if the party claiming excusable delay substantially performs the material obligation which has been delayed within such 45 day notice period from the other party.
 

 

	
            19.7
 	
            EXCEPT FOR THE OBLIGATIONS IN PARAGRAPH 9, NEITHER PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR SPECIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR ANY OBLIGATION ARISING THEREFROM OR OTHERWISE, WHETHER LIABILITY IS ASSERTED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY), AND IRRESPECTIVE OF WHETHER IT HAS ADVISED OR HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE.
 

 

	
            19.8
 	
            Developer’s services and rights herein granted are special, unique, extraordinary and intellectual in character and value such that the loss thereof could not be reasonable compensable in damages in an action at law. Accordingly, Publisher shall be entitled to seek equitable relief by way of injunction or otherwise to prevent the breach or continued breach thereof. Should Publisher’s co-publisher in a particular country or region breach the Agreement, Developer may only seek injunction in the country or region where such breach occurred. 
 

 

	
            19.9
 	
            
If any dispute arises in connection with this Agreement, either party may
convene an extraordinary meeting on their respective Developer’s Project
Manager and Publisher’s Producer by serving not less than 3 Working Days
notice on the other. At such meeting the representatives shall negotiate in good
faith, and in a timely manner, in an effort to resolve the dispute. If the
Developer’s Project Manager and Producer’s Publisher cannot resolve
the dispute, then either party may refer the dispute to the respective chief
executive officers of the parties by serving notice on the other party. The
chief executive officers shall negotiate in good faith, and in a timely manner,
in an effort to resolve the dispute. Nothing in this paragraph shall limit the
ability of either party to seek legal redress in respect of the dispute in a
court of law.
 

 

	
            19.10
 	
            
Developer may change their Project Manager and Publisher may change the
Publisher’s Producer at any time by giving the other party 5 Working
Days’ notice of the change 
 

 

24

 

 

and such notice shall stipulate the new Developer’s Project Manager or Producer’s Publisher name, address, telephone number and any other relevant contact details.

 

	
            19.10
 	
            
Until one year has passed from the initial release of the United States PS2
version of the Product, this Agreement and all questions arising hereunder shall
be governed by and construed in accordance with the laws and decisions of the
State of California without giving effect to the principles thereof relating to
conflicts of law. After such period, the Agreement will be governed by and
interpreted in accordance with the substantive laws of Australia. Subject to the
above, ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST EITHER PARTY ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA UNTIL THE TURNOVER DATE AND
THEREAFTER IN ANY COURT OF COMPETENT JURISDICTION IN AUSTRALIA, AND BY EXECUTION
AND DELIVERY OF AGREEMENT EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS LICENSED PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
either party to bring proceedings against the other party in the courts of any
other jurisdiction. The parties stipulate and agree that any judgment relating
to this Agreement, which is entered in a court located within California, shall
be binding throughout the world and may be sued upon, docketed, entered and/or
enforced, without challenge or opposition on their part and without re-trial of
any of the issues which give rise to such judgment in any state, county,
province, commonwealth, or territory having jurisdiction over their respective
persons or properties. The parties recognize that the above agreement to submit
all controversies to forever-binding adjudication by a court located within San
Francisco, California does not
constitute a confession of judgment on anybody’s part, but is simply an
agreement, similar to an arbitration agreement, to have particular controversies
resolved, once and for all, by a specified tribunal. Notwithstanding the
foregoing, all parties agree that equitable relief, including injunctive and
specific performance, may be necessary and proper to enforce their obligations
and commitments under this paragraph, including without limitation under Paragraphs 2, 10, 11, 12, 13, 14, 15
and 18 of this Agreement and this choice of jurisdiction or venue does not
prevent either party from seeking such relief in any court of competent
jurisdiction throughout the world.
 

 

	
            19.12
 	
            In the event any provision of this Agreement shall be held invalid or unenforceable, it shall be deemed modified only to the extent necessary to make it lawful. To effect such modification, the said provision shall be deemed deleted, added to and/or rewritten, whichever shall most fully preserve the intention of the parties as originally expressed herein.
 

 

	
            19.13
 	
            The prevailing party in any litigation between the parties shall recover from the other party its reasonable legal fees and expenses.
 

 

	
            19.14
 	
            This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
 

 

 

25

 

 

 

ACCORDINGLY this Agreement has been entered into by the parties on the date set out on page 1.

 

	
            Red Mile Entertainment, Inc
 	
            IR Gurus Interactive
 

 

 

	
            /s/   Ed Roffman     
 	
            /s/   Mike Fegan     
 
	
            Ed Roffman, CFO
 	
            Mike Fegan
 

 

 

 

27

 

 

 

DATE: March 1, 2005

 

AMENDMENT 1 

TO THE

 

SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT DATED

 

January 21, 2005 between

 

RED MILE ENTERTAINMENT 

 

AND 

 

IR GURUS INTERACTIVE

 

This Agreement when completely executed shall constitute an amendment (“Amendment #1”) to the Software Development and Licensing Agreement dated January 21, 2005 (the “Agreement”)by and between IR Gurus Interactive (“IR Gurus”) and Red Mile Entertainment, Inc. (“Red Mile”). 

 

The Agreement shall be amended in the following respects only:

 

Paragraph 7.1.3 is deleted in its entirety and replaced with the following:

 

7.1.3 in respect of the use of the Products developed under this Agreement and co-published by Publisher in the PAL territories (as that term is commonly used and understood in the video game business): 

(a)        until the initial Minimum Guarantee payment and any other Minimum Guarantee payments for the PAL territories is fully recouped by the Publisher, Publisher retains 100% of Net Royalty Receipts ; and

	
             
 	
            (b)
 	
            thereafter, Publisher retains xxxxxx of Net Royalty Receipts.
 

 

Paragraph 13.7 of this Agreement is deleted in its entirety and replaced with the following.

 

13.7 Until Publisher has a firm co-publishing offer (accepted term sheet or letter of intent) for the Product in a given territory, Developer may terminate this Agreement for that territory at any time by giving written notice to Publisher that Developer has selected another publisher to publish the Product in that territory. Termination pursuant to this clause will take effect from the date that the Developer has repaid any amounts (in full) paid to it by the Publisher pursuant to this Agreement for such territory. A notice of termination pursuant to this clause 13.7 will be invalid in the event that the opportunity has arisen as a result of the Publisher introducing the Product to the new publisher and such notice was given prior to 31 March 2005.

 

Paragraph 13.9 and 13.9(a) are deleted in their entirety (but not paragraphs 13.9(b) through (d)) and replaced with the following: 

 

	
             
 	
            13.9
 	
            In the event that Publisher does not pay the initial minimum guarantee payment by March 4, 2005 or any minimum guarantee for a specific territory as specified in Schedule 1 within three business days of Publisher receiving good funds for its minimum guarantee from a third party, Developer may terminate this Agreement for such territory by written notice to Publisher. If Publisher does not have a firm deal (accepted offer) by March 31, 2005 or does not make a minimum guarantee payment for either North America or the PAL territories by April 30, 2005, Publisher may terminate this Agreement for the territory or territories for which it has not received such offer or payment. If this Agreement is terminated for all territories in accordance with this clause 13.9:
 

 

13.9 (a) the parties agree that upon termination of this agreement under this paragraph 13.9, any Minimum Guarantees paid by Publisher to Developer are immediately repayable by Developer. Other than these Minimum Guarantees, each party is solely responsible for all expenses (direct and indirect) that have been, or will be, incurred by them under this Agreement.

 

28

 

 

 

 

29

 

 

 

Accordingly, this Amendment 1 to the Agreement has been entered into by the parties on the date set out on Page 1.

 

	
            Red Mile Entertainment, Inc
 	
            IR Gurus Interactive
 

 

 

 

	
            /s/ Ed Roffman                                          
      
 	
            /s/ Mike Fegan                                          
      
 

 

	
            Ed Roffman, CFO
 	
            Mike Fegan, CEO
 

 

 

30

 

 

 

DATE: May 1, 2005

 

AMENDMENT 2 

TO THE

 

SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT DATED

 

January 21, 2005 between

 

RED MILE ENTERTAINMENT 

 

AND 

 

IR GURUS INTERACTIVE

 

This Agreement when completely executed shall constitute an amendment (“Amendment #2”) to the Software Development and Licensing Agreement dated January 21, 2005 (the “Agreement”) and amended on March 1, 2005 by and between IR Gurus Interactive (“IR Gurus”) and Red Mile Entertainment, Inc. (“Red Mile”). 

 

The Agreement shall be amended in the following respects only:

 

The definition of “Term” shall be deleted and replaced in its entirely with the following:

 

“Term” shall mean five years from the initial commercial shipment in a PAL territory. At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional six months (“Sell-off Period”) beyond the term. Royalties for sales of Products during the Sell-off Period shall be paid and remitted in accordance with Paragraph 7.

 

Accordingly, this Amendment 2 to the Agreement has been entered into by the parties on the date set out above.

 

	
            Red Mile Entertainment, Inc
 	
            IR Gurus Interactive
 

 

 

 

	
            /s/ Ed Roffman                                          
      
 	
            /s/ Mike Fegan                                          
                      
 

 

	
            Ed Roffman, CFO
 	
            Mike Fegan, CEO
 

 

 

 

31

 

 

 

DATE: August 3, 2005

 

AMENDMENT 3 

TO THE

SOFTWARE DEVELOPMENT AND LICENSING AGREEMENT DATED

January 21, 2005 between

RED MILE ENTERTAINMENT 

AND 

IR GURUS INTERACTIVE

 

This Agreement when completely executed shall constitute an amendment (“Amendment #3”) to the Software Development and Licensing Agreement dated January 21, 2005 (the “Agreement”) and amended on March 1, 2005 and May 1, 2005 by and between IR Gurus Interactive (“IR Gurus”) and Red Mile Entertainment, Inc. (“Red Mile”). 

 

The Agreement shall be amended in the following respects only:

 

1. The definition of “Term” shall be deleted and replaced in its entirety with the following:

 

“Term” shall mean five years from the latest of the initial commercial shipment in a PAL territory or in an NTSC Territory. At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional twelve months (“Sell-off Period”) beyond the term. Royalties for sales of Products during the Sell-off Period shall be paid and remitted in accordance with Paragraph 7.

 

2. The definition of “Net Royalty Receipts” shall be deleted and replaced in its entirety with the following:

 

“Net Royalty Receipts” shall mean all funds received by Red Mile from any third party publisher licensed by Red Mile to publish the Product or exploit any other rights associated with the Intellectual Property Rights.

 

3. Paragraphs 7.1.1 and 7.1.2 are deleted.

 

4. Paragraph 7.1.3 is deleted in its entirety and replaced with the following:

 

7.1.3 in respect of the use of the Products developed under this Agreement and co-published by Publisher

(a) in the PAL territories (as that term is commonly used and understood in the video game business): 

	
             
 	
            (i)
 	
            the Developer will be entitled to xxxxx% of all minimum guarantee payments made by third party publishers; and
 

	
             
 	
            (ii)
 	
            Publisher retains xxxxxx% of Net Royalty Receipts and Publisher shall pay 50% of Net Royalty Receipts to Developer.
 

 

(b) in the United States of America, Canada and Mexico: 

	
             
 	
            (i)
 	
            the Developer will be entitled to xxxx% of all minimum guarantee payments from third party publishers and 100% of Net Royalty Receipts until Developer has received a total of $xxxxxxxxxxxxxxxxxxxx);
 

	
             
 	
            (ii)
 	
            after Developer has been paid xxxxxx (either from a minimum guarantee payment or from both a minimum guarantee payment and Net Royalty Receipts), Publisher retains xxxxx of Net Royalty Receipts and Publisher shall pay xxxxx of Net Royalty Receipts to Developer.
 

 

(c) in the all NTSC territories (as that term is commonly used and understood in the video game business) other than those set out in clause 7.1.3(b) the Publisher will retain xxxxx of “Net Receipts” and Developer will retain the balance. For the purposes of this clause, “Net Receipts” means all receipts (including minimum guarantees or royalties of any kind) generated from exploitation of the Product less actual costs (being COGS and any out of pocket expenses of both Publisher or Developer)

 

32

 

 

 

Set out below is an illustration:

 

The PAL publishing agreement provides:

	
             
 	
            (a)
 	
            Minimum Guarantee to Red Mile of xxxxxxxxxxxxx
 

	
             
 	
            (b)
 	
            Royalties to Red Mile equal to 100% of Net Sales until the Minimum Guarantee is fully recouped and xxxxx of Net Sales thereafter
 

 

Assume the publishing agreement for United States, Canada and Mexico provides; 

	
             
 	
            (a)
 	
            Minimum Guarantee to Red Mile of USxxxxxxxxxxxxx
 

	
             
 	
            (b)
 	
            Royalties to Red Mile on a sliding scale xxxxxxxxx% of Net Sales
 

 

Assuming payments made to Red Mile under the royalty provisions of the publishing agreements (i.e. after any minimum guarantee is recouped by the third party publisher) in PAL territories is xxxxxxxxxxxxxx, in the United States of America, Canada and Mexico is US xxxxxxxxxx and receipts (net of costs in other territories is US$xxxxxxxxxx, IR Gurus would receive:

 

	
             
 	
            (a)
 	
            Minimum Guarantee equal to US$xxxxxxxxxxxxxxxxxxxxxxxxxx
 

	
             
 	
            (b)
 	
            Share of Net Royalty Receipts of US$xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 

 

Red Mile would receive:

 

	
             
 	
            (a)
 	
            Minimum Guarantee equal to USxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 

Xxxxx Share of Net Royalty Receipts of USxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx)

 

5. Paragraph 7.2 is deleted and replaced with the following:

 

Red Mile shall provide the Developer with a written Royalty Statement specifying in sufficient detail the calculation of Net Royalty Receipts IR Gurus is entitled to (such Royalty Statement to include any statement of royalties provided to Red Mile by a third party publisher). Such statement must be provided within 5 business days of receipt of any statement of royalties from a third party publisher. Each Royalty Statement will be accompanied by a wire transfer for any Royalty due, save that if Red Mile is prevented by the law of any country from making payments outside that country Red Mile shall be entitled to pay the relevant sums to the Developer in that country. All sums payable to Developer pursuant to this Agreement shall be made in the currency funds are paid to Red Mile by third party publishers. 

 

6. Paragraph 7.3 is amended by deleting “verifying the expenditures of the Marketing Guarantee and” after the words “Developer’s behalf to examine those accounts, books and records solely for the purpose of” and by deleting the words “the Marketing Guarantee and to” after the words “Publisher’s accounts, books and records relation to”

 

7. A new paragraph 7.5 will be inserted as follows:

 

Developer and Red Mile will consult one another on any review to be undertaken pursuant to a third party publishing agreement. In the event IR Gurus wishes Red Mile to undertake a review of any royalty statements and Red Mile does not wish so, Red Mile will undertake such review at IR Gurus expense.

 

8. A new paragraph 7A is inserted a follows:

 

7A.1  Red Mile will “Consult” (“Consult” is defined as allowing IR Gurus to review and comment on the agreement, but so long as nothing in the third party publisher  agreement causes Red Mile to be in violation of the Red Mile - IR Gurus Agreement, Red Mile shall have final decision making authority) with IR Gurus in relation to:

 

	
             
 	
            (a)
 	
            the negotiation of the long form publishing agreement for NTSC; and
 

 

33

 

 

 

	
             
 	
            (b)
 	
            the renegotiation of any terms of its publishing agreement with Codemasters.
 

 

By consulting with IR Gurus, Red Mile undertakes to act in good faith in representing the financial and other interests of IR Gurus with respect to the publishing arrangements.

 

7A.2 By consulting with Red Mile, IR Gurus undertakes to act in good faith in assisting Red Mile to complete negotiation of a long form publishing agreement with a third party publisher taking Red Mile’s financial and other interests into account.

 

7A.3 Red Mile must ensure all terms of any publishing agreement are consistent with the rights granted to it under this agreement. 

 

7A.4  The parties acknowledge that the Product is in “code lock down” such that no further amendments to the code other than bug fixes will be made prior to submission of the gold master candidate.

 

7A.5  Any costs incurred by Red Mile or IR Gurus in fulfilling the obligations incurred in the Sections 7 and 8 shall be borne by IR Gurus.

 

9. Paragraph 13.7 is deleted and replaced with the following:

 

“Until February 1 2006, Red Mile will have the exclusive right to sub-licence the rights to the Product in all remaining territories not covered by a publishing agreement as at the date of this Agreement, thereafter these rights will automatically revert to IR Gurus and Red Mile will cease to have any financial interest in the Product in respect of those territories where no binding long form sub-licence has been entered into.

 

10. A new paragraph 14.2 is inserted a follows:

 

14. 2 In the case where a Publishing agreement made by Red Mile with a third party is terminated due to IR Gurus inability to deliver in accordance with the terms of such Agreement, and as a result, Red Mile is required to refund monies received under such Agreement, IR Gurus will refund all monies paid by Red Mile related to the terminated agreement. If Red Mile is required to reimburse the Licensee for additional funds such as advertising, marketing and promotional funds spent by Licensee, IR Gurus will reimburse Red Mile for such amounts as well. 

 

Red Mile will use all reasonable commercial efforts to negotiate publisher and/or distribution arrangements with third parties for all other territories not covered by the “Ubisoft or Code Masters Publisher Agreements” for the Product. 

 

Accordingly, this Amendment 3 to the Agreement has been entered into by the parties on the date set out above.

 

	
            Red Mile Entertainment, Inc
 	
            IR Gurus Interactive
 

 

 

 

	
            /s/ Ed Roffman                                          
      
 	
            /s/ Andrew Neire                                          
    
 
	
            Ed Roffman, CFO
 	
            Andrew Neire, Director
 	
             

 

 

 

34

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