Document:

Exhibit 10.6

 

DATE:  August 11, 2005               

 

 

 

(1)          RED MILE ENTERTAINMENT, INC

 

(2)          PRODIGY DESIGN LIMITED, doing business as SIDHE INTERACTIVE

 

 

And

 

SOFTWARE DEVELOPMENT AND LICENSING

AGREEMENT

 

 

 

 

 

 

 

 

 

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THIS AGREEMENT is made on August 11, 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)
 	
            Prodigy Design Limited, doing business as Sidhe Interactive, a New Zealand corporation whose principal address is Level 7, Willbank House, 57 Willis Street, PO Box 6203, Wellington New Zealand (the “Developer” or “Licensor”) 
 

 

	
            (A)
 	
            The Publisher has licensed From MTV Networks the rights to the Jackass name, and video content for use in developing one or more video games based upon the “Jackass” property.
 

 

	
            (B)
 	
            Publisher desires Developer to develop and deliver to Publisher a product based upon the “Jackass” property (“Product”).
 

 

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 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 

 

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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;

 

“Collateral Materials”
means the Product packaging, User Manuals, demo discs and self-playing demos.

 

“Concept Approval” means formal approval from Sony Computer Entertainment of America authorizing development of the Product on each of the platforms.

 

“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 Tools and Technology” means computer source code and computer binary code, including the game engine and all Developer (and its third party licensors’) proprietary utilities, middleware and development tools, software, technology, associated with the Product and development thereof that are proprietary to Developer or its third party licensors including any improvements and enhancements thereto, regardless of when created.

 

“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;

 

“Development Fee” 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;

 

“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;
 

 

 

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            (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 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 Manufacturer” means Sony Computer Entertainment. 

 

“Initial Machines” means the Sony PSP and PS2 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;

 

“Key Team” means the key team members of the Developer’s team who have prime responsibility for the development of the Product as listed in Schedule 1. This Key Team shall have substantial experience in the game genre of the Product and shall be expressly approved by the Publisher. 

 

“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;

 

“Master Copy” means:

 

	
            (a)
 	
            a non-copy protected and non-encrypted final master copy of a Product for use
 

 

 

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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 Multi Byte language supportable recorded in executable form; and (ii) is accepted for manufacturing and distribution by any applicable hardware manufacturers whose approval is contractually required prior to manufacturing and distribution of the Version for that Initial Machine. The Master Copy shall be the Beta Version with incorporation of any final improvements and correction of any Program Errors found in the testing of any and all elements of the Beta Version;

 

	
            (b)
 	
            a copy protected final master copy of the Version referred to in (a) in its Original Language recorded in executable form;
 

 

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

 

	
            (d)
 	
            any details of clearances, Supporting Documentation and other materials needed for Publisher to manufacture and publish copies of the Product for retail sale and support and maintenance of the Product.
 

 

	
            (e)
 	
            all Source Code and other programming, graphics, sound effects and music and implementing copy protection routines in each of the Versions 
 

 

“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;

 

“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 (each dialect to be determined by Publisher) in connection with the preparation of Translations (as defined below).

 

“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.

 

“Net Sales Receipts” means the actual wholesale selling price of the Product invoiced by Publisher and/or Publisher’s authorized Co-Publisher less (to the extent actually paid, or actually issued, by Publisher or its Co-Publisher, as applicable, in respect of the Product): any credits for returns of Units, price protection or markdowns, credits in lieu 

 

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of returns, any value added tax and any other sales taxes included in such invoice price and actual cost of goods sold (manufacturing costs). 

 

“Original Language” means American English. 

 

“Product” means the software Product currently known as “Jackass” to be developed 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 “Jackass” or such other title for the Product as may be determined by Publisher and MTVN;

 

“Profit Share” means the amounts, in US Dollars, payable by the Publisher to the Developer in accordance with paragraph 6 of this Agreement;

 

“Profit and Loss Statement” means the statement of Profit Share provided by the Publisher to the Developer under this Agreement;

 

“Project Manager(s)” means the person at Developer responsible for the project management of Product and a member of the Key Team; 

 

“Provided Material” shall mean the Program concept, the Underlying Property and all artistic, literary, dramatic, musical and other material provided by Publisher for incorporation into the Program (or which is otherwise required by the Publisher to be incorporated into the Program), and all trademarks and trade dress relating thereto.

 

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

 

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

 

“Retained Material” shall mean collectively the Developer’s Tools and Technology and Developer Trademark.

 

 

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“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;

 

“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 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;

 

“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;

 

“Vertical Slice Demo” means a stand alone version of the Product in the Original Language and such Translations as may be agreed by the parties that demonstrates the functionality of Product for the purposes of marketing which will contain the following features: TBD;

 

“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 New Zealand;

 

 

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            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
 	
            Work for Hire; Publisher’s Rights. Developer acknowledges and agrees that, the intellectual property rights in the Program and Master Copy shall be the sole and exclusive property of Publisher except that the Developer makes no representations with respect to the Provided Materials. The parties agree that the Program and Master Copy created pursuant to this Agreement was specifically commissioned by Publisher as work made for hire, as such term is used in the U. S. Copyright Act. Developer shall ensure that each person working on the development of the Program and Master Copy has entered into or (if he or she has not already entered into) will enter into a written agreement pursuant to which all work performed by such person for Developer is wholly owned by Developer free and clear of any and all rights and claims by that person or
any third party, in order that Developer may grant to Publisher the rights required hereunder. Upon Publisher’s request, Developer shall deliver to Publisher copies of such Agreements. Such copies may be redacted by Developer, but must, at a minimum show name of person, and IP and confidentiality provisions. Developer retains no right to use the Program and Master Copy and agrees not to challenge the validity of Publisher’s ownership in the Program and Master Copy. If the Master Copy or any portion thereof is determined not to be a work made for hire, in consideration of the Development Fee paid to Developer by Publisher, Developer hereby irrevocably assigns to Publisher in perpetuity throughout the universe, all right, title and interest of Developer in and to the Program and Master Copy, including without limitation, all Intellectual Property Rights embodied in or pertaining to the Program and Master Copy, and the complete right to exploit or otherwise use the Program and
Master Copy (including the right to sublicense the Intellectual Property Rights through multiple tiers of sublicensees, in any form of medium, expression or technology now known or hereafter devised (including, without limitation, on-line, cable, satellite, coin-operated systems, radio, television devices, theatrical, audiovisual cassettes, cartridges, hand held systems, CD-ROM, wireless systems and disks)). 
 

 

	
            2.2
 	
            Moral Rights. If Developer (or any of its employees or contractors) has any rights to the Program and Master Copy that cannot be assigned as described above, Developer (and its employees and contractors) unconditionally and irrevocably (a) waives the enforcement of such rights, and all claims and causes of action of any kind against Publisher with respect to such rights, and agrees, at Publisher’s request and expense, to consent to and 
 

 

 

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join in any action to enforce such rights, or (b) in the case where such rights cannot be assigned or waived, grants to Publisher, an exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free license to reproduce, distribute, publicly perform and publicly display the Master Copy, with the right to sublicense such rights through multiple tiers of sublicensees by all means now known or hereafter known or developed. Nothing in this clause 2.2 shall be deemed to be a license to the Retained Materials.

 

	
            2.3
 	
            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 Retained Material including any modifications and enhancements made to the Retained Materials expressly in connection with development of the Program or otherwise. Developer hereby grants to Publisher a royalty-free, worldwide, non-exclusive license throughout the universe to: (i) sell copies of the Program incorporating the Retained Materials in the format delivered to Publisher by Developer only (excluding without limitation  the right to modify the Retained Materials or exploit them in source code format in connection with any other product); and (ii) sublicense such rights through multiple tiers of sublicensees, by all
means now known or hereafter devised (including, without limitation, on-line, cable, satellite, coin-operated systems, radio, television devices, theatrical, audiovisual cassettes, cartridges, hand held systems, CD-ROM, wireless systems and disks). 

 

(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 Developer’s Tools and Technology or (ii) disclose the Developer’s Tools and Technology to any person. This clause 2.3(b) shall not apply to software code delivered by Developer to Publisher in accordance with this agreement provided that Publisher shall not use any such code for any purpose other than in order to completing the Product or creating Translations.

 

	
            2.4
 	
            Third Party Materials. Other than generally commercially available software, Developer shall not use any materials from third parties in connection with the development of the Program(s) or include any such materials in the Program(s) without Publisher’s prior written consent. Publisher shall be entitled to review any agreements which Developer proposes to make or has made in connection with any such third party materials upon request.
 

 

	
            2.5
 	
            Ownership of Provided Material. Developer agrees that the Provided Material shall be owned by or licensed for use herein by Publisher.
 

 

	
            2.6
 	
            Other versions of the Product not on PSP or PS2. Publisher, as licensee of the intellectual property known as Jackass, shall decide whether or not to create other video game versions of the Product. If developer has the technical expertise on the hardware platform, Developer shall have the right of first refusal to develop any other version of the Product. Under this Agreement other versions include all video game formats now known and their successors (i.e., PS3 is a successor to PS2) and the P.C. The parties agree to 
 

 

 

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negotiate in good faith the terms under which Developer would develop such products. If the parties cannot agree on terms for Developer to develop such products within forty-five (45) days of Publisher noticing Developer of its desire to create other versions, Developer shall lose all rights to such other versions and Publisher shall be free to license such rights to a third party. 

 

	
            2.7
 	
            Sequels of the Product on PSP and PS2. Developer shall have the first right of negotiation for the next sequel to the Product, if such sequel is on PSP or PS2. (For sake of clarity, Developer has this right for the first sequel on such hardware platforms). If Publisher and Developer agree to terms for the first sequel on these platforms, Developer will have such rights for the second sequel on these platforms, and so on. Once Developer has lost to right to a particular sequel on these platforms, it has lost the right to all future sequels on these platforms.)  If the parties are unable to negotiate an agreement within forty-five (45) days of Publisher noticing Developer of its desire to create a sequel, Publisher shall be free to negotiate with other developers. Prior to completing an agreement with another developer, Publisher shall
offer the project to Developer on the same terms and conditions as agreed to with the other developer, or on the terms of the last offer made by Developer to Publisher during the negotiating period, whichever terms are more beneficial to Publisher. Developer shall have ten (10) days to elect to match the offer or lose its rights to the sequel and all future sequels. 
 

 

	
            2.8
 	
            Sequels of the Product a platform other than PSP or PS2. Publisher, as licensee of the intellectual property known as Jackass, shall decide whether or not to create Sequels of the Product. If developer has the technical expertise on a hardware platform other than PSP and PS2, Developer shall have the right of first refusal to develop such Sequels of the Product. Under this Agreement Sequels include all video game formats now known and their successors (i.e., PS3 is a successor to PS2) and the personal computer. The parties agree to negotiate in good faith the terms under which Developer would develop such products. If the parties cannot agree on terms for Developer to develop such products within forty-five (45) days of Publisher noticing Developer of its desire to create Sequels, Developer shall lose all rights to such Sequels and
Publisher shall be free to license such rights to a third party.
 

 

	
            3.
 	
            DEVELOPMENT
 

 

	
            3.1
 	
            The Developer shall develop the Product for the Initial Machines and in the Original Language 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. On achieving each Milestone, the Developer shall, deliver to the Publisher all materials relevant to the particular Milestone including all game assets, including source code, source art, audio assets, etc. Developer shall also provide copies of the User Manual and Support Documentation with each Alpha and Beta Version. 
 

 

 

 

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            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
 	
            In order to assist Publisher in selling the Product, Developer shall deliver a Vertical Slice Demo of the Product no later than May 1, 2006. 
 

 

	
            3.5
 	
            The Developer shall appoint a Project Manager who shall liaise with the Publisher during development of the Product. Project manager shall be part of the Key Team and listed on Schedule 2.
 

 

	
            3.6
 	
            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, Vertical Slice Demos, or other Product materials supplied before delivery of the Alpha Version, Beta Version and the Gold Master.
 

 

	
            3.7
 	
            Publisher shall be responsible for submitting the game concepts to the Hardware Manufacturer for approval within ten (10) days of receiving the game concept documents from the Developer. Developer and Publisher shall work together to obtain such approval from the Hardware Manufacturer. Should the game concept be rejected by the 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 Hardware Manufacturer approval of the game concept, Publisher may terminate this Agreement in accordance with Paragraph 12.2.
 

 

	
            3.8
 	
            Publisher shall be responsible for submitting the Gold Master candidates to the Hardware Manufacturer for approval within ten (10) days of receiving the Gold Master candidate from the Developer. Developer and Publisher shall work together to obtain approval of the Gold Master candidates from the Hardware Manufacturer. 
 

 

	
            3.9
 	
            As part of the Provided Materials, Publisher shall make available to Developer on a timely basis video footage from the Jackass movie and TV series for inclusion in the game.
 

 

	
            3.10
 	
            The Key Team shall have the prime responsibility for the development of the Program and shall work diligently and to the best of its abilities for the Developer in doing so.
 

 

	
            3.10.1
 	
            Publisher agrees that members of the Key Team may leave the Developer (whether by way of resignation, dismissal or otherwise) and in such circumstances Developer will notify Publisher in writing of such departure and Developer will make all reasonable effort to procure a suitable replacement (and notify Publisher in writing of such efforts). After allowing the Developer a thirty (30) calendar day period to effect the above, Publisher shall have the right to terminate this Agreement if any member of the Key Team leaves Developer and is not replaced with an individual of a similar experience and qualification within a reasonable period following the departure of the Key Team 
 

 

 

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member and such replacement will be agreed by the Publisher, such agreement not to be unreasonably withheld.

 

	
            4.
 	
            DELIVERY AND ACCEPTANCE
 

 

	
            4.1
 	
            Developer shall submit to Publisher a Version of the Product at each Milestone, except Milestone 1, for approval. Publisher shall 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
 

 

	
            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
 	
            In the case where Publisher must also obtain Milestone approval of MTV (Milestone Schedule shall call out such Milestones), if the Publisher shall not have given the Developer such notice under paragraph 4.2 within the said 10 (ten) business days, that Version shall be deemed rejected. If MTV fails to accept or reject such a Milestone submission within such ten-day period, then the Milestone schedule shall shift on a day-for-day basis for each day after agreed dates that such acceptance or rejection is not forthcoming. For those Milestones not requiring MTV approval, if the Publisher shall 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 in a form free of Errors. 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 
 

 

 

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Manufacturer, i.e., a US Gold Master for SCEA and one (1) multi-language Gold Master each for SCEE and for SCEI, respectively and any other Gold Masters as required by Sony such as for China or Korea.). The parties acknowledge that the Hardware Manufacturer shall have the final right to accept or reject such Masters. 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.
 	
            TRANSLATION
 

 

	
            5.1
 	
            Publisher shall provide on a timely basis all localized text and voices. Developer shall be responsible for integrating localized text and voice over material and generating a multi-language Gold Master embodying the Translations at no additional charge, including multi-byte languages, as defined in Translations.     
 

 

	
            5.2
 	
            If the Developer fails to perform such integration and fails to cure such default within ten (10) days of receipt of notice from Publisher, Publisher may use a third party for the integration, 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 translation integration out of Profit Share earned.
 

 

	
            5.3 
 	
            If pursuant to this Agreement, the Publisher uses a third party to complete the game or carry out the integration, 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 game or integrations and that all such things will be held securely at all times and returned to the Developer when work on the game or integration 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 the game or an integration. However,
except as expressly provided in this Paragraph 5.3 neither Publisher nor any third party shall be entitled to use the Retained Materials except in connection with completing the game or an integration.
 

 

	
            5.4
 	
            Publisher shall be responsible for providing on a timely basis all localized text and audio for integration. 
 

 

	
            5.5
 	
            Upon Publisher’s written request, Developer, shall provide additional integration services at a fee of xxxxx per additional language. Any such integration fees, shall be considered additional development fees in calculating the Profit Share under Paragraph 6.
 

 

	
            6.
 	
            PROFIT SHARE
 

 

	
            6.1
 	
            The Publisher shall pay the Developer the following Profit Share of xxxxx percent (25%) of the profits, if any, on the project. Profit Share shall be calculated as follows: 
 

 

 

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All monies actually received by Publisher from the sale or licensing of the Products; less xxxxx0 to reimburse Publisher for its internal overhead and less all reasonable, documented payments actually made, if any, by Publisher to unaffiliated third parties (defined as an entity not controlled by Red Mile and where the costs have been negotiated on an “arms length” basis) for the following costs directly related to the development and manufacture and sale of the Products: 

 

	
            a.
 	
            Fees payable to Developer pursuant to Paragraph 7
 

 

	
            b.
 	
            Royalties paid to MTV for the license to the Jackass name/video
 

	
            c.
 	
            Fees paid to talent (Johnny Knoxville, Wee Man, etc.) Such payments are only necessary if Publisher contracts for additional services from such talent, not previously provided. 
 

	
            d.
 	
            Q/A testing
 

	
            e.
 	
            Cost of goods sold including third party royalties paid to the Hardware Manufacturer or its designee
 

	
            f.
 	
            Marketing, sales and distribution costs
 

 

 

	
            6.2
 	
            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 Profit and Loss Statement specifying in sufficient detail the calculations of the Profit Share, and the Profit Share (if any) due to the Developer in respect of that quarter. Each Profit Share Statement shall be accompanied by a wire transfer for any Profit Share due, save that if the Publisher is prevented by the law of any country from making payments outside that country it shall be entitled to pay the relevant sums to the Developer in that country. All sums payable to Developer pursuant to this Agreement (including the Development Fee and Profit Share) shall be made in U.S. Dollars. At each Quarter End the Publisher may retain
from Profit Share payable a reserve against returns or other credits in respect of Units sold by the Publisher hereunder in the manner set out in paragraph 6.2.1. 
 

 

	
            6.2.1
 	
            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”) 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 Profit Share in Section 6.1. (For example, should a co-publisher withhold from Publisher $1,000 in payments which would fall under Section 6.1 above, Publisher would withhold $150 from Developer in a reserve. When co-publisher releases Publisher’s reserve, Publisher will release Developer’s reserve.) In the case where Publisher self-publishes, the reserve shall be twenty percent (20%) of Gross Sales for the quarter and such reserve shall be liquidated
within six months.
 

 

	
            6.3
 	
            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 
 

 

 

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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 for the purpose of verifying the expenditures of the Marketing Guarantee and verifying the accuracy of the Royalty Statements under paragraph 6.2 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 Sausalito, 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 Profit Share 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 Profit and Loss Statement more than once. 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.

 

	
            6.4
 	
            Each Profit and Loss 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 Profit and Loss 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.
 

 

	
            7.
 	
            DEVELOPMENT FEE
 

 

	
            7.1
 	
            The fee for the development of the Product for the Initial Machines 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 4 above of the materials produced in respect of the corresponding Milestone. 
 

 

	
            7.2
 	
            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.
 

 

	
            7.3
 	
            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.
 

 

 

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            7.4
 	
            The Publisher shall have no obligation to make any payments to the Developer under this Agreement for anything save for the payment of the Development Fee referred to in this paragraph 7, Profit Share under paragraph 6 and payments (if relevant) under paragraph 5. 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 Development Fee payment and included in calculating Profit Share payable under this Agreement, unless otherwise agreed in writing.
 

 

	
            7.5
 	
            All Development Fees paid by Publisher to the Developer together with payments (if relevant) under paragraph 5 (except payment of Profit Share) shall be deductible in calculating the Profit Share payable under this Agreement. 
 

 

	
            7.6
 	
            The parties agree that no finder’s fees are payable to any party under this transaction.
 

 

	
            8.
 	
            INDEMNIFICATION.
 

 

	
            8.1
 	
            Developer Indemnification. Subject to the provisions of paragraph 8.3 (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 10 (Warranties of Developer). Notwithstanding anything in this paragraph 8 to the contrary, in the event that, by reason of a claim by a third party of infringement based on the Retained Materials, 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.. 
 

 

	
            8.2
 	
            Publisher Indemnification. Subject to the provisions of paragraph 8.3(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 11 (Warranties of Publisher). 
 

 

	
            8.3
 	
            Indemnification Procedures. If a third party asserts any claim or allegation which, if proven, would trigger the indemnification obligations set forth in paragraphs 8.1 and 
 

 

 

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8.2, 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 8 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 8 state the entirety of the parties’ obligations with respect to any claim by any third party.

 

	
            8.4
 	
            Developer shall procure and maintain for itself and its employees and contractors all insurance coverage required by New Zealand law. Developer also agrees to maintain general liability insurance, in the amount of at least NZ 1,000,000. Upon request, Developer shall furnish Publisher with an up-to-date certificate of insurance evidencing such coverage.
 

 

	
            9.
 	
            MARKETING
 

 

	
            9.1
 	
            Developer shall promptly provide Publisher, in each instance upon Publisher’s reasonable written request (so as not to interfere with Developer’s efforts to complete and deliver the Products as contemplated hereunder) and at no cost to Publisher, with any other files and materials (e.g. screenshots, art files, game play description and ongoing cooperation for manual creation and the like) that Publisher may reasonably required for Publisher’s creation of any Collateral Materials.
 

 

	
            9.2
 	
            Developer shall promptly provide Publisher, in each instance upon Publisher’s written request, with (a) Developer’s logo artwork, (b) text of the appropriate copyright notice for the Product, and (c) a list of credits for Developer personnel, to receive credit in the Product and/or Product manual.
 

 

	
            9.3
 	
            Subject to Hardware Manufacturer approval, Developer shall receive text and logo credits in the Product, in Collateral Materials, specifically, but not limited to, the front and back of the Product package. The size and manner of such credits shall be at Publisher’s reasonable discretion, provided that such credits shall appear in approximately the same size of Publishers logo on the Product and in the credits of all Versions of the Product. No casual or inadvertent failure by Publisher to accord such credit, and no failure of any third party to abide by its agreement with Publisher to accord such credit, shall be construed as a breach of this Agreement; provided, however, upon receipt of written notice from Developer specifying in reasonable detail 
 

 

 

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any failure by Publisher to accord the credit required hereunder, Publisher shall prospectively cure such failures under its direct control in future pressings of the Product and further creation of Collateral Material and will use reasonable commercial efforts to have co-publishers comply with such requirements.

 

	
            9.4
 	
            Publisher shall be entitled to use and publish and permit others to use and publish the name of the Developer and its personnel (including any professional or business identity adopted by the Developer), photographs, biographical material, or any reproduction or simulation thereof in connection with the promotion, marketing and/or distribution of the Product but not for the endorsement of any other product or service. The Developer shall have the right to reasonably approve any photograph or biographical materials concerning the developer or its personnel; failure to not disapprove such material in writing within five (5) business days of presentation shall be deemed approval. Once the Developer has approved any particular photograph or biographical material, Developer shall be deemed to have approved such photograph or material for all subsequent uses. Developer
shall make its employees available for any press interviews or trailer/video shoots as Publisher may request from time to time at Publisher’s expense and upon reasonable notice.
 

 

	
            9.5
 	
            Prior to the publication, manufacturing, distribution, display, use, or sale of any marketing, advertising or packaging materials for the Product which include Developer information, Publisher shall submit to Developer for its prior written approval samples of all such materials. Developer shall have a period of five (5) business days from receipt (the “Approval Period”) to review and approve or disapprove any such materials, such approval not to be unreasonably withheld; any disapproval shall be in writing and shall contain a detailed summary of the issues and proposed corrective actions. If Developer does not provide a written approval or disapproval within the Approval Period, the material submitted shall be deemed approved. Once a particular item has been approved or deemed approved for one use, it shall be deemed approved for all substantially
similar uses (e.g. an approved counter card shall be deemed approved for use as a poster, standee, etc.) without requiring any submission; once the English language version of any item has been approved or deemed approved, exact translations shall be deemed approved without requiring any submission. 
 

 

	
            9.6
 	
            Publisher shall solely determine the optimal time and manner of announcing the Product and having the website “go live”. Publisher will own, operate and maintain the “official” website for the Product. Developer shall cooperate with Publisher on providing content for such website. 
 

 

	
            9.7
 	
            Publisher shall, subject to the terms of this Agreement and consistent with its own policies, practices and procedures, use its 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 six (6) months from the date that the Publisher accepts any Gold Master or within three (3) months from the date that Hardware Manufacturer releases the hardware within each region within the Territory, whichever is later. 
 

 

 

 

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            9.8
 	
            Publisher shall furnish to Developer without charge fifteen (15) samples of each 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.
 	
            WARRANTIES OF DEVELOPER
 

 

	
            10.1
 	
            The Developer represents and warrants that:
 

 

	
            (a)
 	
            it is and will at all material times own or control all Intellectual Property Rights in the Retained Materials, 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 Retained Materials 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 provided by Developer (i.e., excluding the Provided materials) will be obscene or libelous or otherwise in breach of any relevant laws or regulations of any territory which relates to health and safety;
 

 

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

 

	
            (g) 
 	
            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;
 

 

	
            (h) 
 	
            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;
 

 

	
            (i) 
 	
            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 
 

 

 

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promotional purposes, except as provided in this Agreement or with the prior written consent of Publisher.

 

	
            11.
 	
            WARRANTIES OF PUBLISHER
 

 

	
            11.1
 	
            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;

 

	
            11.2
 	
            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.
 

 

	
            12.
 	
            TERMINATION
 

 

	
            12.1
 	
            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. 
 

 

	
            12.2
 	
            If either Version (PS2 or PSP) does not receive Concept Approval from Sony Computer Entertainment of America (SCEA) and MTV Network, Publisher may terminate this Agreement. Such a termination will be treated as a termination for convenience and Publisher’s liability to Developer for such termination for convenience shall be determined as follows:
 

 

(a)        Any monies due to Developer for Milestones 1 (Contract Signing) through 3 (Payment 3) shall be paid.

 

	
            (b)
 	
            Upon delivery to Publisher of Milestone 4 (Final Preproduction/First Playable),
 

 

 

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Developer shall be paid $122,500 (which sum is intended to cover Developer’s “burn rate” for three [3] weeks) and Publisher shall submit the Milestone to SCEA for Concept Approval. In the event Concept Approval is denied before the later of November 7, 2005 or three (3) weeks after such payment is made, and Publisher elects to terminate this Agreement, Developer shall be paid xxxxxx less the unspent portion of such payment, to be calculated at the rate of xxxxxx per week. By way of example, if the termination occurs after 2 weeks, then Publisher shall pay Developer xxxxxx.

 

(c)        If Concept Approval is still pending on the later of November 7, 2005 or three (3) weeks after the payment is made pursuant to section 12.2(b), above, Developer shall be paid xxxxxx. In the event concept approval is denied within three (3) weeks after such payment is made, and Publisher elects to terminate this Agreement, Developer shall be paid xxxxxx less the unspent portion of such payment, to be calculated at the rate of xxxxxx per week. By way of example, if the termination occurs after 2 weeks, then Publisher shall pay Developer xxxxxx.

 

(d)        If Concept Approval is still pending upon delivery to Publisher of Milestone 5 (Production 1), Developer shall be paid xxxxxx. In the event concept approval is denied within three (3) weeks after such payment is made, and Publisher elects to terminate this Agreement, Developer shall be paid xxxxxx less the unspent portion of such payment, to be calculated at the rate of xxxxxx per week. By way of example, if the termination occurs after 2 weeks, then Publisher shall pay Developer xxxxxx.

 

(e)        If Concept Approval is still pending three (3) weeks after the payment is made pursuant to section 12.2(d), above, Developer shall be paid xxxxxx. In the event concept approval is denied within three (3) weeks after such payment is made, and Publisher elects to terminate this Agreement, Developer shall be paid xxxxxx less the unspent portion of such payment, to be calculated at the rate of xxxxxx per week. By way of example, if the termination occurs after 2 weeks, then Publisher shall pay Developer $ xxxxxx.

 

(f)         If Concept Approval is still pending following the sequence of events described in sections 12.2(b) through (e), above, the process for payments described in sections 12.2(b) through (e) shall be repeated for each succeeding Milestone until such time as either Concept Approval is achieved or Publisher elects to terminate this Agreement because Concept Approval has been denied. 

 

	
            12.3
 	
            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. 
 

 

 

 

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            12.4
 	
            Publisher may terminate this Agreement for convenience, at any time. In the event of a termination for convenience, for reasons other than those covered by Paragraph 12.2, Publisher’s sole liability for such termination for convenience shall be any monies due for approved and unpaid Milestones, and for submitted but unpaid Milestones, plus the next Milestone payment.
 

 

 

	
            12.5
 	
            If at any time, Developer is more than thirty days late delivering the Gold Master Milestone, and such event is not due to the acts or omissions of Publisher, MTV Networks or the Hardware Manufacturer, Publisher may, without prejudice to its rights and remedies, terminate this Agreement. 
 

 

	
            13.
 	
            CONSEQUENCES OF TERMINATION
 

 

	
            13.1
 	
            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.
 

 

	
            14.
 	
            SUPPORT
 

 

	
            14.1
 	
            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 14.1 in respect of each
Version shall terminate twelve (12) months after the initial commercial release of the Product pursuant to this Agreement.
 

 

	
            14.1.1
 	
            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 guidelines, Developer shall be responsible at its own cost to promptly correct the Product. 
 

 

	
            14.2
 	
            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 
 

 

 

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period of 12 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, New Zealand 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.

	
            15.
 	
            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:

 

	
            Prodigy Design Limited

Level 7, Willbank House

57 Willis Street

PO Box 6203 

Wellington New Zealand

Attn:      Mario Wynands, Managing Director                
 	
            Red Mile Entertainment.

4000 Bridgeway

Suite 101

Sausalito, CA 94965

Attention:  CFO

 

 
 
	
            Phone: 011 64 4 4712638

Fax: 011  64 4 4712639
 	
            Phone: 1 (415) 339-4245

Fax: 1 (415) 339-4249
 

                

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. Copies of all notices to Developer should be sent to David S. Rosenbaum, Esq., 6303 Owensmouth Avenue, 10th Floor, Woodland Hills, California USA 91367 (Phone: 818-936-3455; Fax: 818-936-3055).

 

	
            16
 	
            CONFIDENTIALITY
 

 

	
            16.1
 	
            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 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.
 

 

	
            16.2
 	
            The obligations of confidentiality and non-use specified in paragraph 16.1 will not apply to any Confidential Information of one party which:
 

 

 

 

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            16.2.1
 	
            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;
 

 

	
            16.2.2
 	
            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;
 

 

	
            16.2.3
 	
            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;
 

 

	
            16.2.4
 	
            is independently developed by such party without use of the other party’s confidential information; or
 

 

	
            16.2.5
 	
            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.
 

 

	
            16.3
 	
            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 16 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.
 

 

	
            16.4
 	
            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.
 

 

 

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24

 

 

 

 

	
            17
 	
            GENERAL
 

 

	
            17.1
 	
            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 17.1 shall not apply to any deliberate misrepresentations made before this Agreement was made.
 

 

	
            17.2
 	
            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 Development Fee and/or Profit Share 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.
 

 

	
            17.3
 	
            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.
 

 

	
            17.4
 	
            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.
 

 

	
            17.5
 	
            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 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.
 

 

	
            17.6
 	
            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 
 

 

 

{00017805.DOC/ / 08/11/2005  01:55 PM}

25

 

 

 

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.

 

	
            17.7
 	
            EXCEPT FOR THE OBLIGATIONS IN PARAGRAPH 8, 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.
 

 

	
            17.8
 	
            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. 
 

 

	
            17.9
 	
            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.
 

 

	
            17.10
 	
            
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 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.

 

 

	
            17.11   
 	
            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. Any controversy arising out of this Agreement or because of any duty created thereby, shall be resolved in a federal or state court located in San Francisco, California. The parties consent to jurisdiction in such courts and waive objection to such venue and agree that service of the summons to such proceeding (and of any papers which accompany it), shall be deemed sufficient if made by certified or registered mail, postage prepaid, addressed to the parties’ addresses as designated in or hereafter changed under paragraph 17. The parties 
 

 

 

{00017805.DOC/ / 08/11/2005  01:55 PM}

26

 

 

 

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, 9, 10, 11, 12, 13, and 16 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.

 

	
            17.12
 	
            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.
 

 

	
            17.13
 	
            The prevailing party in any litigation between the parties shall recover from the other party its reasonable legal fees and expenses.
 

 

	
            17.14
 	
            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.
 

 

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

 

 

	
            Red Mile Entertainment, Inc.
 	
            Prodigy Design Limited
 

 

 

	
            /s/ Ed Roffman
 	
            /s/ Mario Wynands
 
	
            Ed Roffman, CFO
 	
            Mario Wynands,
Managing Director
 	
             

				

 

 

 

 

{00017805.DOC/ / 08/11/2005  01:55 PM}

27Exhibit 10.7

MTVN MERCHANDISE LICENSE AGREEMENT

 

Agreement made as of  March 28, 2005, by and between MTV Networks, a division of Viacom International Inc., a Delaware corporation, with offices at 1515 Broadway, New York, New York 10036 (“MTVN”), and Red Mile Entertainment, Inc., a Nevada corporation, with offices at 4000 Bridgeway Suite 10, Sausalito, CA 94965 (“Licensee”) (this “Agreement”).

 

BASIC PROVISIONS

 

 

	
            The “LICENSED PROPERTY”
 	
            (1)  “MTV JACKASS” name, trademark and logo (the “Jackass Logo”). 

 

(2)  The names, images and likenesses of Jason Acuna aka “Wee Man”, Brandon Dicamillo, Ryan Dunn, Dave England, Steve Glover aka “Steve O”, Johnny Knoxville, Preston Lacy, Bam Magera, Ehren McGehey and Chris Pointus, solely as provided to you by MTVN (the “Jackass Talent”).

 

(3) Television footage from MTVN’s television program entitled “MTV Jackass” aired on the MTV: Music Television programming service in the United States of America (the “Show”), which footage is clear for use and controlled by MTVN for exploitation in an interactive gaming product, solely as provided to you by MTVN (the “Footage”). MTVN shall provide Licensee with Footage, as available, to be included in the Licensed Products (as hereafter defined) based upon discussions between Licensee and MTVN regarding the type of Footage (a) desired by Licensee and (b) which works with the gaming elements of the Licensed Product (as hereafter
defined). MTVN and Licensee shall, based upon the Footage supplied by MTVN, mutually agree on the final Footage to be incorporated into the Licensed Products.

 

The Jackass Logo, Jackass Talent and the Footage, collectively, the “Licensed Property”). 

 
 
	
             
 	
            The Licensed Property shall be used solely in connection with the Licensed Products on the Licensed Platforms (as hereafter defined) and not in connection with any other use, platform or medium.
 

 

 

 

 

 

 

	
             

The “LICENSED PRODUCTS”
 	
             

One interactive video gaming tangible good software product (“Title One”), one sequel title (“Sequel Title”)(a title that is a sequel to a video game product released on a Licensed Platform (as hereafter defined) than its predecessor title was released on shall be deemed a Sequel Title) and, solely in the event of a Renewal Term (as hereafter defined), a third title based on and featuring stunts from the Show, made available commercially as separate single software products or games, which shall be branded with the Jackass Logo and
feature certain of the Jackass Talent and which are limited to being played solely and exclusively in or on the following formats, media and categories of devices (hereafter, the “Licensed Platforms”):

 
 
	
             

 
 	
            (1) Video Game Systems (CD/DVD electronic delivery format): Solely Sony Playstation II, Nintendo Game Cube and Microsoft X Box video game systems (CD format) and successor video game systems of the foregoing; provided, however, that such successor game systems are solely updated, next generation versions of the foregoing (e.g., Sony Playstation III and Microsoft X Box II).

 

(2) Programmable LCD Hand-Held Systems: Solely Nintendo Gameboy Advance, and Sony PSP handheld video game systems and successor programmable LCD hand-held systems of the foregoing; provided, however, that such successor programmable LCD hand-held systems are solely updated, next generation versions of the foregoing (e.g., Gameboy Advance II). 

 

(3) Personal Computers Systems (CD-Rom electronic delivery format): certain personal computer systems (CD-ROM format) such as Apple, IBM and compatibles
utilizing MS-DOS and/or Windows operating systems.

 
 
	
             
 	
            ((1) through (3) collectively, the “Licensed Platforms”). 

 
 

 

 

 

 

 

 

	
            “MULTI-PLAYER FUNCTIONALITY”
 	
            Each of the Licensed Platforms shall also be deemed to include multi-player internet play functionality whereby the Licensed Products may contain functions constituting an online component which would enable an end-user to use the Licensed Product to play with or against one or more players on or through the Internet; provided, however, that in each case, (1) the player and players using such functionality must have purchased the Licensed Product, (2) there is no access to this online functionality through the open internet and (3) under no circumstances shall the Licensed Property or Licensed Products be in any MTV branded area (physical, virtual
or logical), presence or service outside the actual Licensed Product itself that would promote, enable or facilitate the online multi-player functionality. For the avoidance of doubt, such functionality shall be limited exclusively by direct player-to-player interface and not as a part of any multi-player service or featured capability. The foregoing shall not prohibit Licensee from establishing an environment in which end users who have purchased Licensed Products are permitted, by selecting or enabling the multi-player feature in their Licensed Product, to access a hosted service in or through which multi-play amongst such end user/purchasers will be executed.
 
	
             

“EXCLUDED PLATFORMS AND MEDIA”
 	
             

The electronically developed content of the Licensed Products may not be adapted, ported, or in any way transferred, in its present or modified state, to any software format or platform other than the Licensed Platforms. Furthermore, the software formats and platforms authorized herein for a Licensed Product shall be compatible only with those delivery systems specified as Licensed Platforms; all other delivery systems, formats and platforms are expressly excluded, including, without limitation:

 
 
	
             
 	
            (1) Coin, Currency, Credit or Debit-Operated Games:  All coin, currency, credit or debit-operated arcade games, including without limitation, all stand alone, upfront video game consoles, redemption and novelty games, amusement rides, pinball games and so-called “virtual reality” games.

 
 

 

 

 

 

 

 

	
             
 	
            (2) Non-Programmable LCD Hand Held Systems:  All non-programmable LCD based hand held gaming systems or devices. 

 

(3) On-Air Programming Franchises:  All interactive gaming formats playable, regardless of the format of distribution or delivery, as part of MTVN’s on-air programming formats incorporating an interactive gaming element playable on or through the Internet simultaneously or in connection with such on-air programming formats. For purposes of illustration only, interactive gaming formats such as, “MTV’s Web Riot” on air/on-line programming franchise or other MTVN programming franchises incorporating an interactive gaming element hereinafter developed or devised.

 
 
	
             
 	
            (4) Datacasting, Mobile and Wireless Technology:  Any and all use, distribution, operation, interactive communication or transmission of digital content, text, graphics, signals, controls, documentation or programming code via terrestrial and/or satellite technologies, digital television, cable television, radio, telephone, paging and text messaging systems or any other use of the electromagnetic spectrum, wireless or so-called ‘mobile’ platforms.

 

(5) Other:  All
other systems/formats not defined as a Licensed Platform, including, without limitation, music tools, character-based chess games, coloring books, database and trivia games, all productivity or utility software (including, without limitation, type font and clip art programs, day planner and calendar programs, and screen saver programs) and future platforms hereafter invented or devised.
 
	
             

The “LICENSED TERRITORY”
 	
             

Solely in the United States of America, its territories and possessions, Australia, Brazil, Canada, the People’s Republic of China, the current official Member States (i.e., nations) of the European Union, Indonesia, Japan, Malaysia, the Philippines, the Russian Federation and Singapore.
 

 

 

 

 

 

 

	
             

“ADDITIONAL TERRITORIES”
 	
             

MTVN shall conduct standard trademark clearance searches for the Licensed Property in connection with the International Class covering the Licensed Products in the following geographic territories: New Zealand, India, Mexico, Hong Kong and Chile (the “Additional Territories”). In the event that MTVN is able to obtain trademark registrations for the Licensed Property in connection with the International Class covering the Licensed Products in an Additional Territory, then MTVN shall notify Licensee and, this Agreement shall be amended to incorporate such Additional Territory as a Licensed Territory.
 
	
             

The “LICENSED CHANNELS OF DISTRIBUTION”
 	
             

(1) Mass market general merchandise stores (e.g., Target and Kmart), club stores (e.g., Costco and B.J.’s wholesale), mass market toy stores (e.g., Toys R Us and KB), specialty toy stores (e.g., FAO Schwarz and Noodle Kidoodle), mid tier stores (e.g., JC Penny and Sears), department stores (e.g., May Company and Macy’s), convenience stores whether independent or chain, book stores whether independent or chain (e.g., Barnes & Noble), college bookstores whether independent or chain, specialty/trend stores (e.g., Spencers and Gadzooks), music stores whether independent or chain (e.g., Musicland), video stores whether independent or chain,  

computer/electronics stores (e.g., Software Etc. and Electronic Boutique) and office Supply stores (e.g., Staples and Office Max). 

 
 

 

 

 

 

 

 

	
             
 	
            (2)  Licensee shall have the limited non-exclusive right to distribute the Licensed Products through the wholly owned and operated websites of retailers in the Licensed Channels of Distribution (the “LCD Retailers”) provided, however, that the websites owned by the LCD Retailers shall be in compliance with and Licensee acknowledges and agrees on behalf of the LCD Retailers, that (a) MTVN shall have approval over all content used on the websites used by the LCD Retailers incorporating the Licensed Products and the Licensed Property, (b) in no event shall the LCD Retailer develop a MTVN branded on-line boutique or website, (c) in no event shall the LCD Retailer use any MTVN content (i.e., video clips, sound bytes and copies of book pages, etc.) on
their websites, (d) there shall be a one-way link from the websites used by the LCD Retailer incorporating the Licensed Products and the Licensed Property to the appropriate MTVN website, (e) on-line orders for the Licensed Products shall only be fulfilled for orders placed within the Licensed Territory and (f) Licensee and the LCD Retailers shall not market, promote or advertise the Licensed Products, display or use the Licensed Property on any of its or their web sites, web pages or other electronic or digital media in any manner which is inconsistent with the requirements and required approvals of this 
 
	
             
 	
            Agreement applicable to other media (e.g., paper, retail stores). In the event Licensee becomes aware of any violation or breach of any of the foregoing requirements by any LCD Retailers, Licensee shall immediately take action to correct and cure such violation or breach and if unable to do so within 30 days shall, unless specific written approval is obtained from MTVN, revoke and terminate such LCD Retailer from its designation and status as an “LCD Retailer” under this Agreement for all purposes.

 

Licensee covenants and agrees that it will use best efforts to
ensure that the LCD Retailers are in compliance with the terms and conditions set forth above.

 
 
	
            The “ INITIAL TERM”
 	
            The initial term of this Agreement shall commence on March 28, 2005 and continue through March 31, 2010. 
 

 

 

 

 

 

 

	
             

The “RENEWAL TERM”
 	
             

Solely if (1) Licensee has shipped a Sequel Title of the Licensed Product for video game systems (in accordance with Section (1) of the definition of Licensed Platforms) and (2) MTVN has received $xxxxxx in royalties from the sale of the Licensed Products, then Licensee shall have the option to extend this Agreement until December 31, 2012 (the “Renewal Option”). The Renewal Option shall be exercised by Licensee in writing no later than December 31, 2009 provided, however, that Licensee remits a payment to MTVN with such renewal notice in the amount of two-thirds of the royalties paid as of January 1, 2010 or  xxxxxx, whichever is greater.

 

(The Initial Term and the Renewal Term collectively, the “Term”)

 

 
 
	
             

CURRENCY

 
 	
             

U.S. Dollars.
 
	
            LANGUAGE

 
 	
            English. 

 

Licensee shall also have the right to localize the Licensed Products into foreign languages (i.e., translating/dubbing tracks contained in the Licensed Products) for those Licensed Territories in which the Licensed Product shall be sold; provided, however, that, without limiting any rights contained herein, MTVN shall have approval over the localized Licensed Products including, but not limited to, quality/identity (e.g.,
sound quality and identity of individual providing dubbing services) of such localized elements of the Licensed Product.

 
 
	
            The “ROYALTY RATE”
 	
            xxxxxx percent of Net Sales (as defined in the annexed Additional Terms and Conditions) for all units of Licensed Products sold up to and including xxxxxx units and  xxxxxx percent of Net Sales thereafter.

 
 
	
            “PRESENTATION DATE TO LICENSEE’S RETAILERS”
 	
            E3 Expo 2006.
 
	
             

“INITIAL SHIP DATE TO LICENSEE’S RETAILERS”
 	
             

Licensee shall ship Licensed Products playable on the Playstation Portable Licensed Platforms no later than October 15, 2006 for Title One and for the Playstation III and/or Microsoft Xbox Platforms no later than October 31, 2009 for the Sequel Title.
 

 

 

 

 

 

 

	
             

“MARKETING PLANS”
 	
             

Prior to the implementation of any marketing plans in connection with the release of a Licensed Product, MTVN shall have the opportunity to review and consult with Licensee regarding such marketing plans. As provided in Section 4(a) of the Additional Terms And Conditions, all marketing and promotional materials shall be subject to MTVN’s prior written approval, not to be unreasonably withheld or delayed.
 
	
             

“SOFTWARE DEVELOPER”
 	
             

Licensee covenants and agrees that the Licensed Products shall be of at least the same quality to other first class products on the market. Additionally, MTVN shall have prior approval over the software developer Licensee desires to engage to develop the Licensed Products.

 
 
	
            “LICENSED PRODUCT DISTRIBUTOR/CO-PUBLISHER”
 	
            Licensee covenants and agrees that it shall have entered into a written distribution agreement with a distributor/co-publisher for distribution of the Licensed Products, at least throughout North America, no later than March, 31 2006 for Title One, March 31, 2008 for a Sequel Title, if any and seven months prior to a mutually agreed ship date for all titles of Licensed Products to be sold during the Renewal Term, if any,. MTVN shall have prior approval over the identity of such distributor(s)/co-publisher(s) Licensee desires to engage to distribute, sell, market or advertise the Licensed Products.

 
 
	
            “RIGHT OF FIRST NEGOTIATION FOR THE ‘BAM SHOW’ AND ‘THE NATURE SHOW (AKA WILDBOYZ)’ “

 

 
 	
            After the date of this Agreement, and continuing during the Initial Term, if MTVN desires, in its sole discretion, and owns and controls the right to license the right to manufacture, distribute, sell and advertise an interactive video gaming tangible good software product for use on the Licensed Platforms based on one or both of the television program franchises currently known as (1) The Bam Show and (2) The Nature Show (aka Wildboyz), to be aired domestically on the MTV: Music Television programming service ((1) and (2), collectively, the “Potential Licensed Programs”), then MTVN shall notify Licensee and Licensee shall have a right of first negotiation whereby the parties shall negotiate in good faith for a period of 30 days from the date of such notice (the
“Negotiation Period”) regarding the terms and conditions of a potential license for the Potential Licensed Programs. Upon the expiration of the Negotiation Period, if the parties are unable to reach an agreement in good faith, then MTVN shall be free to offer such right to the Potential Licensed Programs to a third party.

 
 

 

 

 

 

 

 

	
            “COPYRIGHT NOTICE”
 	
            “© _____   [Licensee to fill in year of publication]  MTV Networks, a division of Viacom International Inc. All Rights Reserved.”
 
	

             

“TRADEMARK NOTICE”
 	
             

“MTV JACKASSTM“. Licensee shall also include the following notice on all materials set forth in Section 5(b) of The Additional Terms And Conditions in proximity to the Licensed Property. “MTV JACKASS” and all related titles and logos are trademarks of MTV Networks, a division of Viacom International Inc.

 
 
	
            “RIGHTS AND CLEARANCES” 
 	
            Licensee shall be solely responsible for all costs and expenses related to the Licensed Products including, but not limited to, third party clearances, in connection with the development, manufacture, packaging, duplication, marketing, distribution and sale of the Licensed Products. All applicable fees for talent and music relating to the Licensed Products (including, any guild, union and residual obligations, music synchronization fees and other audio and art costs including materials requested by Licensee that MTVN must create) shall be paid by Licensee.

 
 
	
            “SERVICES OF JACKASS TALENT”
 	
            Licensee shall be solely responsible, at its sole cost and expense, to engage the Jackass Talent for all additional required services, if any, in connection with the Licensed Products including but not limited to the creation of the Licensed Products (e.g., voice over and motion capture sessions and activities) and in the advertising and promotional materials and activities related thereto; provided, however, that Licensee has obtained such rights pursuant to a separate agreement by and between Licensee and the Jackass Talent (the “Jackass Talent Services Agreement(s)”). Licensee covenants to obtain Jackass Talent Services Agreement(s), which shall be consistent with the
terms and conditions of this Agreement.  MTVN makes no representations or warranties of any nature whatsoever with respect to the services of the Jackass Talent, nor shall MTVN in any way be liable for the performance or non-performance by the Jackass Talent of its obligations under the Jackass Talent Services Agreement(s).
 

                

This Agreement includes the Additional Terms and Conditions, Exhibits A-F and Attachment A annexed hereto and made a part hereof. All capitalized terms in the Additional Terms and Conditions shall have the respective definitions as set forth in the Basic Provisions herein.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

 

 

 

	
            RED MILE ENTERTAINMENT, INC
 	
            MTV NETWORKS, a division of
 
	
             
	
            Viacom International Inc.
 	
             

 

	
            By:/s/ Ed Roffman
 	
            By:/s/ Heidi Packer Eskenazi____
 	
             

	
            Name: Ed Roffman
 	
            Name: Heidi Packer Eskenazi
 	
             

	
            Title:  
 	
            Chief Financial Officer
 	
            Title:  Vice President, Licensing,
 	
             

	
             
	
            Merchandising & Interactive
 
							

 

 

 

ADDITIONAL TERMS AND CONDITIONS

 

ARTICLE 1.    LICENSE. MTVN hereby grants to Licensee, and Licensee hereby accepts, the exclusive right to incorporate the Licensed Property on the Licensed Products solely for the purpose of the manufacture, distribution, sale and advertisement of the Licensed Products through the Licensed Channels of Distribution in the Licensed Territory during the Term (the “License”) as specified in the Basic Provisions. Except as specifically set forth in the definition of Licensed Product Distributor/Co-Publisher contained in the Basic Provisions of this Agreement, Licensee shall not have the right to sublicense the rights granted hereunder.

 

ARTICLE 2.    RESERVATION OF RIGHTS. MTVN retains all rights not expressly granted hereunder including, but not limited to, the right to distribute and sell the Licensed Products through premium offers, combination and give-away sales, direct response, direct mail, home shopping type of networks, the on-line medium or any other non-traditional medium now known or hereafter invented, sales clubs, incentive programs, theme parks/ recreational attractions and activities, any MTVN or its affiliated companies’ retail outlets and the rights to the Licensed Property, and all names, trademarks and likenesses of characters which are used in connection with a motion picture or other theatrical or live stage presentation for all products, including the Licensed Products.

 

	
            ARTICLE 3.
 	
            ROYALTIES, ACCOUNTING AND AUDIT.
 

 

	
            (a)
 	
            COMPUTATION:
 

 

 (i)        Royalties shall be payable by Licensee at the Royalty Rate set forth in the Basic Provisions on Net Sales of all Licensed Products. “Net Sales” shall mean gross sales less actual customary trade quantity discounts, and allowances, “Price Protection” (as hereafter defined) and returns, the aggregate of which shall not exceed fifteen percent of gross sales. Except for those expressly provided for in this Section 3(a)(i), there shall be no deductions of any sort or kind including, but not limited to, deductions for cash discounts, costs or expenses incurred in the manufacture, distribution, sale or advertisement of the Licensed Products, or for uncollected bills. “Price Protection” shall mean if the manufacturer’s
suggested retail price (“MSRP”) of a Licensed Product is lowered by Licensee due to slower sales, then instead of a retailer returning the originally priced Licensed Products to Licensee and repurchasing the lower priced Licensed Products, the retailer sells the originally priced Licensed Products already in stock and receives a rebate from Licensee proportionate to the change in the MSRP).

 

 (ii)       Royalty obligations shall accrue upon the sale of the Licensed Products. A Licensed Product is considered “sold” when it is invoiced, shipped, or paid for, whichever event occurs first.

 

 (iii)      In the event that Licensed Products are sold to any party affiliated, controlled, or in any way related to Licensee at a special price lower than the average price charged to other parties, the royalty payable to MTVN shall be based upon said average price.

 

 

 

 

	
            (b)
 	
            TAXES.
 

 

 (i)        Licensee shall make all payments due hereunder free and clear of any and all taxes, duties, imports or similar charges (other than as set forth below).

 

 (ii)       All amounts payable to MTVN shall be subject to all laws, regulations and tax treaties now or hereafter in existence, which require the reporting and/or deduction of withholding taxes from payments made to MTVN under this Agreement. In the event that a reduced withholding rate is appropriate under the applicable income tax treaty, Licensee shall report or deduct such withholding taxes from the payment hereunder to MTVN at such reduced rate (including, but not limited to, a zero rate of tax) pursuant to the applicable income tax treaty.

 

 (iii)      Licensee shall have the right to make such reportings and/or deductions in accordance with such laws, regulations and tax treaties, and the payment and/or reporting thereof to the governmental agency concerned in accordance with such laws, regulations and tax treaties shall constitute payment hereunder to MTVN. Licensee’s right to withhold under this Section 3(b) is conditioned upon Licensee furnishing MTVN with official tax receipts, certificates or other documentation with respect to withholding taxes so reported and/or deducted within a reasonable period of time of such report and/or deduction. If Licensee fails to provide MTVN with such documentation, then all payments due under this Agreement shall be gross amounts payable without set-off or counterclaim, free and clear of any withholdings or
deductions of any kind.

 

	
            (c)
 	
            PAYMENTS:
 

 

 (i)        Royalties shall be payable on a quarterly basis throughout the Term, within 45 days after the close of each respective quarter. Quarters shall be based on a standard calendar year. Licensee may maintain a reasonable reserve of royalties otherwise due hereunder in respect of returns, which in no event shall exceed fifteen percent (15%) of gross sales for such quarter; provided, however, that each such reserve of royalty payments shall be liquidated and processed based on actual returns received by Licensee, no later than the end of the second following quarter, and shall be payable to MTVN within 45 days thereafter.

 

	
            (ii)
 	
            All payments and Quarterly Reports to MTVN hereunder shall be
 

payable in US Dollars and sent via wire transfer to the following address: 

 

The Chase Manhattan Bank New York, NY

ABA# 021-000021

For Credit to: MTV Networks

A/C No. 910-2-735462

Reference: Either Invoice or Contract Number and Company Name.

 

With a copy of such Quarterly Report to the Vice President, Program Enterprises, MTV: Music Television at the address specified in Article 16.

 

 

 

 

 (iii)       All payments past due shall be subject to a late charge of one percent per month (or the highest rate allowed by law if lower), from the date such payments were due.

 

	
            (d)
 	
            ACCOUNTING:  
 

 

 (i)        Once the first Licensed Product has sold, within 45 days after the close of each quarter, Licensee shall furnish to MTVN complete and accurate statements of its sales of Licensed Products and royalties due MTVN, in the form annexed hereto as Exhibit A and Exhibit B (the “Quarterly Reports”). Quarterly Reports shall be furnished whether or not Licensee has actual royalties to report for any quarter. All Quarterly Reports shall be signed and certified as correct by an officer of Licensee. Acceptance by MTVN of royalty payments and Quarterly Reports shall not preclude MTVN from questioning the accuracy thereof. 

 

 (ii)       The Quarterly Reports shall be broken down by country and all sales shall be stated in the currency of the country where they were made. Each Quarterly Report shall also include the United States currency equivalent of each local currency figure in such Quarterly Report and the exchange rate applied. All payments shall be in United States currency drawn on a United States bank

 

	
            (e)
 	
            AUDIT:
 

 

 (i)        Licensee shall keep accurate books of account and records at its principal place of business of all transactions relating to, or affecting, this Agreement, during the Term and for a period of three years thereafter. MTVN, or its representative, shall have the right during reasonable business hours to examine and verify Licensee’s physical inventory of the Licensed Products as well as Licensee’s books of accounts and records, and to make copies and extracts thereof.

 

 (ii)       In the event that an audit by MTVN discloses an underpayment in royalties due MTVN, Licensee shall promptly pay MTVN such discrepancy plus a late charge of one percent per month (or the highest rate allowed by law if lower), from the day such payments were due. If such audit discloses a discrepancy of five percent or more for any quarter and the underpayment is greater than one thousand dollars, Licensee shall also reimburse MTVN for all reasonable costs, fees and expenses, incurred by MTVN in connection with the audit.

 

 

 

 

	
            ARTICLE 4.
 	
            QUALITY, SAMPLES, APPROVALS AND SUPPLIERS/MANUFACTURES.
 

 

 (a)       The quality and style of all Licensed Products, and the manner in which the Licensed Property may appear on the Licensed Products and on or in any packaging, promotional materials, labels, advertising, publicity and display materials of any kind and in any medium which are used in connection with the Licensed Products are subject to MTVN’s prior approval and shall be in full conformity with all applicable laws and regulations.

 

 (b)       At each milestone stage of development or production and prior to manufacture, Licensee shall promptly provide MTVN with two copies of the milestone stages of development for each Licensed Product and all related materials (each an “Approval Item”) as set forth in the Attachment A, for MTVN’s approval, which may be withheld in MTVN’s sole discretion. However, once MTVN provides approval of concepts for Approval Items in any milestone stage of development, MTVN may not rescind such approvals; provided, however, that Licensee acknowledges and agrees that any such approval shall not limit MTVN’s right to subsequently disapproves, in its sole discretion, said Approval Items that are
consistent with approved concepts but are nonetheless unsatisfactory to MTVN in other ways (e.g., poor quality artwork). MTVN shall advise Licensee in writing of its approval or disapproval of each Approval Item within 10 business days. No Approval Item shall be deemed approved unless and until MTVN has given its written approval. Licensee shall be permitted to proceed beyond any development or production stage where approval is required without first securing such approval solely if, upon MTVN’s notification to Licensee, Licensee makes all required corrections, changes and alterations, as directed by MTVN, and Licensee is responsible for all costs and expenses associated with making such corrections, changes and alterations necessary to comply with those unsatisfactory elements as identified by MTVN. In connection with the submission of Approval Items by Licensee for MTVN’s approval, Licensee shall submit to MTVN a completed
copy of the Licensed Product Approval Form provided by MTVN as Exhibit C. Once an Approval Item has been approved, Licensee shall not depart therefrom. Approval by MTVN shall not relieve Licensee of any of its agreements, indemnities and warranties hereunder.

 

 (c)       Licensee shall promptly reimburse MTVN for any and all costs of artwork and other creative materials prepared by MTVN in connection with the Licensed Products.

 

 (d)       Concurrently with the initial shipment of each Licensed Product, Licensee shall furnish to MTVN, at no cost to MTVN, 50 samples of each English language version of the Licensed Product and five samples of each localized/foreign language version of the Licensed Product and each subsequent year of the Term, 25 samples of each English language version of the Licensed Product provided such version of the Licensed Product is still being manufactured and shipped. Any Licensed Products requested by MTVN in excess of the foregoing amounts shall be made available to MTVN at Licensee’s cost unless such requested amounts exceed 250 units or the Licensed Products are for resale in which case such Licensed Products shall be made available to MTVN at Licensee’s or the Licensed Product Distributor/Co-Publisher’s, as applicable, best wholesale price.

 

 

 

 

 (e)       During the Term, Licensee shall permit representatives selected by MTVN access to Licensee’s or the Licensed Product Distributor/Co-Publisher’s, as applicable, floor stock for sampling purposes at any time during normal business hours upon reasonable notice.

 

 (f)        At any time during the Term, and for a period of one year thereafter, upon MTVN’s request therefor, Licensee shall provide MTVN with a listing of the names and addresses of Licensee’s third party manufacturers on the Approval of Manufacturer Form attached hereto as Exhibit D, and, if additionally requested by MTVN, a copy of Licensee’s agreement with any such manufacturer, unless Licensee is specifically precluded from providing such agreement pursuant to confidentiality restrictions. If such manufacturer utilizes the Licensed Property for any unauthorized purpose, Licensee shall ensure that such utilization is immediately halted. 

 

 (g)       From time to time, upon MTVN’s reasonable request, Licensee shall include certain materials provided by MTVN relating to MTVN’s programs, programming services, or ancillary businesses in the packaging of the Licensed Products; provided, however, that the cost of such materials and their inclusion are borne by MTVN.

 

	
            ARTICLE 5.
 	
            MARKINGS.
 

 

 (a)       Licensee shall affix the Copyright and Trademark Notices set forth in the Basic Provisions to all Licensed Products and to all packaging, labels, promotional, advertising, publicity, and display materials used in connection therewith, in accordance with instructions from MTVN. Except for Licensee’s name, “Fluent Entertainment Inc.”, Licensee’s interactive gaming brand “Adrenalife” and the Licensed Product Distributor/Co\Publisher’s name, no Licensed Products, or related materials, shall contain any other copyright, trademark or trade name unless Licensee has obtained MTVN’s prior consent. MTVN may at any time require an addition to or change of the Copyright and Trademark Notices, effective not less than 30 days after receipt by Licensee of notice thereof; provided, however, that Licensee shall have the right to continue to distribute any inventory already manufactured at the time of such notice. Licensee shall fully cooperate with MTVN in connection with MTVN’s obtaining or maintaining copyright and/or trademark protection for the Licensed Property in MTVN’s name. 

 

 (b)       Licensee shall affix to the Licensed Products and all packaging, labels, promotional materials, advertising, publicity, and display materials used in connection therewith, any other legends, markings and notices required by any law or regulation in the Licensed Territory or which MTVN reasonably may request.

 

 (c)       Licensee acknowledges and agrees that it shall provide a credit to any third party creators of any Licensed Properties, as directed by MTVN, on the Licensed Products or packaging or other materials related thereto.

 

 

 

 

	
            ARTICLE 6.
 	
            OWNERSHIP.
 

 

 (a)       As between MTVN and Licensee, all right, title and interest in and to the Licensed Property shall be and remain the sole and complete property of MTVN. Licensee recognizes the value of the goodwill associated with the Licensed Property, that the Licensed Property has secondary meaning in the mind of the public, and that the trademarks and copyrights in the Licensed Property, and any registrations therefor, are good and valid. All use by Licensee of the Licensed Property shall inure to the benefit of MTVN. Licensee shall not, during the Term or thereafter, contest or assist others to contest, MTVN’s rights or interests in the Licensed Property or the validity of this License. Licensee shall not seek any copyright or trademark registration for the Licensed Property.

 

 (b)       Any copyright, trademark, or other proprietary rights owned by Licensee and heretofore used by it, which are used in connection with the Licensed Products as approved by MTVN pursuant to Section 5(a) above, shall continue to be owned by Licensee and shall not become the property of MTVN.

 

 (c)       All right, title, or interest in or to any copyright, trademark, or other proprietary rights that come into existence during the Term as a result of the exercise by Licensee of any right granted to it hereunder, shall immediately and automatically vest in MTVN.

 

 (d)       Except as otherwise provided, all materials that come into existence during the Term, including, but not limited to, art work and designs, packaging, labels, and promotional, advertising, publicity, and display materials used in connection with the Licensed Products shall be deemed “works made for hire” for MTVN within the meaning of the U.S. Copyright Law. To the extent that any such work does not so qualify, for the consideration set forth herein, Licensee hereby irrevocably and absolutely assigns to MTVN all rights throughout the universe in perpetuity in all media now known or hereafter developed including, but not limited to, the copyright and any extensions and renewals thereof and the trademarks and the goodwill associated therewith.

 

 (e)       Licensee agrees to execute and deliver to MTVN any documents which MTVN may reasonably request to confirm MTVN’s ownership of its rights hereunder. Licensee hereby irrevocably appoints MTVN as its attorney-in-fact coupled with an interest to sign any such documents in Licensee’s name.

 

 (f)        At MTVN’s request, Licensee shall be obligated to obtain written assignments of copyright in favor of MTVN in respect of any artwork or other copyrightable subject matter developed in connection with the Licensed Property on the Licensed Products, in the form attached hereto as Exhibit E.

 

 

 

ARTICLE 7.    INFRINGEMENTS. Licensee shall promptly notify MTVN of any apparently unauthorized use or infringement by third parties of any rights granted to Licensee herein, and at MTVN’s expense, shall cooperate fully in any action at law or in equity undertaken by MTVN with respect to such unauthorized use or infringement. Licensee shall not institute any suit in connection with any apparently unauthorized use or infringement without first obtaining the consent of MTVN to do so, and MTVN shall have the sole right to determine whether or not any action shall be taken on account of any such unauthorized uses or infringements.

 

	
            ARTICLE 8.
 	
            REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.
 

 

	
            (a)
 	
            Licensee represents, warrants, and undertakes as follows:
 

 

	
            (i)
 	
            It is free to enter into and fully perform this Agreement;
 

 

 (ii)       All ideas, creations, designs, materials and intellectual property furnished by Licensee in connection with the Licensed Products shall be Licensee’s own and original creation or fully licensed by Licensee including, but not limited to, Licensee’s interactive gaming brand “Adrenalife”

 

 (iii)      The Licensed Products and all materials used in connection therewith shall be of the highest standard reasonably suitable for goods of the type of the Licensed Products. The Licensed Products will be safe for use by consumers and will comply with all applicable governmental rules, guidelines, codes, regulations, and warranties (express or implied) including, without limitation, those contained in the Child Safety Protection Act and/or adopted by the Consumer Product Safety Commission;

 

 (iv)      The Licensed Products shall be manufactured, distributed, sold and advertised in accordance with all applicable federal, state and local laws including but not limited to all applicable labor laws and regulations and in a manner that will not reflect adversely upon MTVN, and shall not infringe upon or violate any rights of any third parties;

 

 (v)       Licensee shall use its best efforts to obtain maximum sales of the Licensed Products in the Licensed Territory during the Term;

 

 (vi)      Licensee has obtained or shall obtain all required authorizations, approvals, licenses, or permits from all government authorities in order for it to enter into and perform its obligations pursuant to this Agreement;

 

 (vii)     Licensee shall not sell, distribute, market or permit any third party to sell, distribute or market any Licensed Products which are damaged, defective, “seconds” or otherwise fail to meet the specifications quality or notice approval requirements contained hereunder; and

 

 (viii) Licensee shall ensure that the Software Developer and the Licensed Product Distributor/Co-Publisher comply with the terms and conditions of this Agreement.

 

 

 

 

	
            (b)
 	
            MTVN represents, warrants, and undertakes as follows:
 

 

	
            (i)
 	
            It is free to enter into and fully perform this Agreement; and
 

 

 (ii)       The Licensed Property is original to and the sole property of MTVN, and does not infringe upon or violate any copyright, trademark or proprietary right of any third party.

 

	
            ARTICLE 9.
 	
            INDEMNITIES.
 

 

 (a)       Licensee shall at all times indemnify and hold MTVN, its officers, directors and employees harmless from and against any and all claims, damages, liabilities, costs and expenses, including reasonable counsel fees, arising out of or relating to any breach or alleged breach by Licensee of any representation, warranty or undertaking made herein, or out of any defect (latent or patent) in the Licensed Products; provided, however, that MTVN shall give prompt notice, cooperation and assistance to Licensee relative to any such claim or suit, and provided further that no settlement of any such claim or suit shall be made without the prior consent of MTVN.

 

 (b)       MTVN shall at all times indemnify and hold Licensee, its officers, directors and employees harmless from and against any and all claims, damages, liabilities, costs and expenses, including reasonable counsel fees, arising out of or relating to any breach or alleged breach by MTVN of any representation, warranty or undertaking made herein; provided, however, that Licensee shall give prompt notice, cooperation and assistance to MTVN relative to any such claim or suit, and provided further that MTVN shall have the option to undertake and conduct the defense and/or settlement of any such claim or suit so brought and that no settlement of any such claim or suit is made without the prior consent of MTVN.

 

ARTICLE 10.   INSURANCE. Licensee shall obtain and maintain at its own cost and expense from a qualified insurance company, separate polices for (a) standard Product Liability Insurance and (b) standard Errors and Omissions Insurance, both naming MTVN as an additional named insured, with respect to all Licensed Products manufactured hereunder, whether sold during the License Term or thereafter. The Product Liability Insurance shall provide protection against any and all claims, demands and causes of action arising out of any defects or failure to perform, alleged or otherwise, of the Licensed Products or any material used in connection therewith or any use thereof during the License Term and thereafter. The amount of coverage for each policy shall be $3,000,000 per occurrence. The
policies shall provide for 10 days notice to MTVN from the insurer pursuant to Article 16, in the event of any modification, cancellation or termination thereof. Licensee agrees to furnish MTVN a Certificate of Insurance evidencing same prior to the final execution of this Agreement which shall be attached hereto as Exhibit F. In no event shall Licensee manufacture, distribute or sell the Licensed Products prior to receipt by MTVN of such evidence of insurance.

 

 

 

 

	
            ARTICLE 11.
 	
            DEFAULT.
 

 

 (a)       Upon the occurrence of any of the following events (each of which is a “Default”), then in addition and without prejudice to any rights which it may have at law, in equity or otherwise, MTVN shall have the right to terminate this Agreement, to delete from this Agreement any elements of the Licensed Property or any Licensed Products and/or to require the immediate payment of any royalties due or to become due hereunder:

 

 (i)        Licensee fails to meet the Presentation Date To Licensee’s Retailers or the Initial Ship Date To Licensee’s Retailers of the Licensed Products;

 

 (ii)       Licensee fails to actively manufacture, advertise, distribute or sell the Licensed Products;

 

 (iii)      Licensee fails to make a payment or furnish a Quarterly Report in accordance herewith and does not cure such failure within 15 days after notice thereof;

 

 (iv)      Licensee fails to comply with the approval, quality, and safety requirements hereunder and/or the Licensed Products do not comply with such requirement and/or the Licensed Products are the subject matter of adverse or negative publicity due to such failure;

 

 (v)       Licensee fails to comply with any other of Licensee’s material obligations hereunder or breaches any warranty or representation made by it hereunder and does not cure such failure or breach within 15 days after notice thereof;

 

 (vi)      Licensee sells or otherwise disposes of all or substantially all of its business or assets to a third party, or control or ownership of Licensee is changed or transferred in contravention of Article 25;

 

 (vii)     Licensee sells or causes others to sell the Licensed Products outside the Licensed Channels of Distribution or outside the Licensed Territory; 

 

 (viii)    Licensee fails to obtain or maintain insurance in the amount of the type provided for herein;

 

(ix)       Licensee contests or assists others to contest MTVN’s rights or interests in the Licensed Property or the validity of this License; or

 

 (x)       Licensee fails to enter into a written distribution agreement for the Licensed Products by  in accordance with the definition of Licensed Product Distributor/Co-Publisher. 

 

 (xi)      Licensee fails to comply with any provision of any other agreement between Licensee and MTVN.

 

 

 

 

 (b)       In the event that the Licensed Products pose a safety threat to the consumer, or are the subject of a claim or inquiry by the Consumer Product Safety Commission or the Child Safety Protection Act or any other person, agency or commission because of quality and/or safety concerns, and/or labeling or are the subject of negative publicity due to poor quality and/or safety of the Licensed Products, Licensee shall, upon MTVN’s reasonable request, immediately recall such Licensed Products from the market place, and take any other measures MTVN may reasonably demand.

 

 (c)       If a petition in bankruptcy is filed by or against Licensee, or Licensee is adjudicated bankrupt, which is not dismissed within 30 days, or Licensee makes any assignment for the benefit of creditors or becomes insolvent, is placed in the hands of a trustee or receiver, fails to satisfy any judgment against it or is unable to pay its debts as they become due, whichever is sooner, this License shall automatically terminate forthwith without any notice whatsoever. Upon such termination for any reason under this Section 11(c) Licensee, its receiver, representatives, trustees, agents, administrators, successors and assigns shall have no further rights hereunder, and neither this License nor any right or interest herein shall be deemed an asset in any insolvency, receivership or bankruptcy.

 

ARTICLE 12.               FORCE MAJEURE. In the event that Licensee is prevented from manufacturing, distributing or selling the Licensed Products because of any act of God; unavoidable accident; fire; epidemic; strike, lockout, or other labor dispute; war, riot or civil commotion; act of public enemy; enactment of any rule, law, order or act of government or governmental instrumentality (whether federal, state, local or foreign); act of terrorism; or other cause of a similar or different nature beyond Licensee’s control, and such condition continues for a period of 60 days or more, either party hereto shall have the right to terminate this Agreement effective at any time during the continuation of such condition by giving the other party at least 30 days notice to
such effect. In such event, the royalties on sales theretofore made shall become immediately due and payable and this Agreement shall be automatically terminated.

 

	
            ARTICLE 13.
 	
            EFFECT OF EXPIRATION OR TERMINATION.
 

 

Upon the expiration or termination of this Agreement for any reason, all rights granted to Licensee herein shall forthwith revert to MTVN, with the following consequences:

 

 (a)       No portion of any prior payments shall be refundable to Licensee, and any and all payments due or to become due, including any royalties shall be immediately due and payable. 

 

 (b)       After the expiration or termination of this Agreement, Licensee shall not manufacture, advertise, distribute or sell the Licensed Products containing or including the Licensed Property or any product which may infringe upon MTVN’s proprietary rights, or use any name, logo or design which is substantially or confusingly similar to the Licensed Property on any product in any place whatsoever. Licensee shall promptly deliver to MTVN a statement indicating the number of Licensed Products then currently on hand or in the process of being manufactured. MTVN shall have the right to conduct a physical inventory in order to ascertain or verify such inventory and statement. Except as provided in Section 13(c), such inventory shall at MTVN’s option, be destroyed by Licensee or purchased by MTVN at
Licensee’s cost of manufacture. Disposition of any plates, molds, forms, lithographs and other material relating to 

 

 

the Licensed Products then remaining on hand shall be subject to notice from MTVN to Licensee either to destroy the Licensed Products or to deliver the same to MTVN or its designee. In the event that MTVN requests Licensee to destroy its inventory, the Licensed Property or materials relating thereto, MTVN may require Licensee to deliver to MTVN an affidavit by an officer of Licensee, attesting to such destruction in such form as MTVN may in its sole discretion require.

 

 (c)       Upon the expiration of this Agreement, so long as Licensee is not in default at the time of expiration, Licensee may continue to sell the Licensed Products, previously manufactured and on hand, on a non-exclusive basis during a period of 90 days thereafter, subject to all of the terms and conditions contained in this Agreement; provided, however, that: (i) the Licensed Products shall be sold in the ordinary course of business at prices not lower than the prevailing wholesale price or prices charged by Licensee during the 90 day period immediately preceding the expiration of this Agreement, (ii) no new Licensed Products are manufactured during such sell-off period and (iii) MTVN is paid its then existing Royalty Rate on all Licensed Products sold during the sell-off period.

 

ARTICLE 14. CONFIDENTIALITY. Each of Licensee and MTVN may, from time to time, be exposed to and will be furnished with certain information, relating to the other’s plans for certain productions and businesses, which are confidential. Each of Licensee and MTVN shall keep confidential and not reveal or disclose any of said information, material or data to any third party or the terms of this Agreement, or any agreement Licensee enters into pursuant to this Agreement during the Term or thereafter. Neither Licensee nor MTVN shall disclose or make known to anyone outside of Licensee or MTVN, as applicable, directly or indirectly, the interest of the other in this Agreement or the terms of this Agreement. It is acknowledged and agreed that Licensee shall have the right to disclose the existence of this Agreement, but no financial or any
other terms and conditions of this Agreement, for the purposes of obtaining a Software Developer, a Licensed Product Distributor/Co-Publisher and to other third parties as required by Licensee to perform under this Agreement. The provisions of this Article 14 shall not apply to information which is (a) or becomes publicly available, (b) required to be disclosed pursuant to a court order or applicable law, rules or regulations or (c) independently developed by the disclosing party.

 

ARTICLE 15. PRESS RELEASES/PUBLIC STATEMENTS. Licensee shall make no public statements or issue any press releases regarding this Agreement, or the Licensed Products, without the prior consent of MTVN. Notwithstanding the foregoing, Licensee shall have the right to discuss the Licensed Products in the ordinary course of business to effectuate the terms and conditions of this Agreement (e.g., presenting the Licensed Products at E-3).

 

ARTICLE 16. NOTICES.   All notices, requests, approvals, consents and other communications required or permitted under this Agreement, except for payments, shall be in writing and shall be sent by facsimile to the facsimile number specified below. A copy of any such notice shall also be personally delivered, sent by mail or overnight courier delivery service with the capacity to verify receipt of delivery on the date such notice is transmitted by telecopy to the addresses specified below.

 

 

 

 

If to MTVN:

 

MTV Networks, a division of Viacom International Inc.

Attention:  Ms. Heidi Packer Eskenazi, Vice President, Licensing, Merchandising & Interactive

1515 Broadway

New York, New York 10036-5797

Telephone:  (212) 846-7145

	
            Telecopy:  
 	
            (212) 846-7908
 

 

With a copy to:

 

MTV Networks, a division of Viacom International Inc.

Attention:  Ms. Hillary Cohen, Director, Business & Legal Affairs

1515 Broadway

New York, New York 10036-5797

Telephone:  (212) 846-6758

	
            Telecopy:  
 	
            (212) 846-1992
 

 

If to Licensee:

 

Red Mile Entertainment, Inc.

Attention: Mr. Ed Roffman, Chief Financial Officer

4000 Bridgeway

Suite 101, Sausalito, CA 94965

Telephone: (415) 819-0919

	
            Telecopy:  
 	
            (415) 339-4249
 

 

Receipt of such notice, request, approval, consent or other communication shall be deemed conclusively made (a) if personally delivered, at the time of delivery or (b) if mailed or sent by overnight courier service, upon receipt thereof. In any event, action or proceeding, service of process upon Licensee may be accomplished by sending such process in the manner specified herein for the giving of notice to Licensee. Either party may change its address or facsimile number for notification purposes by giving the other party notice of the new address or facsimile number and the date upon which it will become effective.

 

ARTICLE 17. GOVERNING LAW.   This Agreement and all questions arising hereunder shall be governed by, and construed in accordance with, the laws and decisions of the State of New York without giving effect to the principles thereof relating to conflicts of law. Each of the parties hereto (a) irrevocably agrees that the federal courts of the Southern District of New York and the New York State courts shall have sole and exclusive jurisdiction over any suit or other proceeding arising out of or based upon this Agreement, (b) submits to the venue and jurisdiction of such courts and (c) irrevocably consents to personal jurisdiction by such courts.

 

ARTICLE 18. COUNTERPARTS.   This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one single agreement between the parties.

 

 

 

 

ARTICLE 19. RELATIONSHIP.   Nothing herein contained shall be construed to constitute a partnership or joint venture between the parties hereto, and neither Licensee nor MTVN shall be bound by any representation, act or omission of the other.

 

ARTICLE 20. SEVERABILITY.   If any provision of this Agreement is held by a court of competent jurisdiction to be contrary to law, then the remaining provisions of this Agreement shall remain in full force and effect.

 

ARTICLE 21. WAIVER.   No delay or omission by either party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by either party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be in writing and signed by the party waiving its rights.

 

ARTICLE 22. ENTIRE AGREEMENT.   This Agreement, and any Exhibits attached hereto, is the entire agreement between the parties with respect to its subject matter, and there are no other representations, understandings, or agreements between the parties relative to such subject matter.

 

ARTICLE 23. AMENDMENTS.   No amendment to, or change, waiver or discharge of, any provision of this Agreement shall be valid unless made in writing and signed by an authorized representative of the party against which such amendment, change, waiver or discharge is sought to be enforced.

 

ARTICLE 24. SURVIVAL.    The terms of Article 3, Section 4(f), Article 6, Article 8, Article 9, Article 10, Article 13, Article 14, Article 15, Article 17, this Article 24, Article 25, and Article 27 shall survive the expiration or
termination of this Agreement for any reason.

 

 

 

ARTICLE 25. ASSIGNMENT This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted assigns, except that neither this Agreement nor Licensee’s rights or obligations hereunder shall be assigned or transferred by Licensee without the prior consent of MTVN and any attempted assignment without such consent shall be void ab initio and of no force and effect; provided, however, that no consent shall be necessary from MTVN in the event of an assignment to a successor entity resulting from a merger, acquisition or consolidation by Licensee or assignment to an entity under common Control with, Controlled by or in Control of Licensee so long as such assignment is not to a Restricted Entity. In
addition, Licensee shall not pledge this Agreement, or any of its rights hereunder, as security or collateral to any third party unless (a) MTVN grants its prior approval which may be withheld in its sole discretion as to the identity of such lender, (b) such lender takes its interest subject to the terms and conditions of this Agreement and confirms in writing to MTVN that it shall agree to be bound by the terms and conditions of this Agreement and (c) such lender cannot assign this Agreement in the event of a default of a Licensee obligation to lender. “Control” means any person or entity that, directly or indirectly, (i) owns more than 50% of the outstanding voting securities or equity interests in an other entity or (ii) possesses the power to direct or cause the direction of the management and policies of an other entity, whether through the ownership of voting securities or equity, by contract or otherwise.
“Restricted Entity” means any competitor of MTVN or an entity that does not have capitalization and funding sources at least equal to or greater than that of Licensee immediately prior to any such proposed assignment and in the case of a change of Control of Licensee, causes the capitalization and funding of Licensee to be worse than that of Licensee immediately prior to the proposed change of Control.

ARTICLE 26. CONSENTS, APPROVALS AND REQUESTS. Except as specifically set forth in this Agreement, all consents, requests and approvals to be given by either party under this Agreement shall be (a) in writing and (b) not be unreasonably withheld. Each party shall make only reasonable requests under this Agreement.

 

ARTICLE 27. THIRD PARTY BENEFICIARIES. Each party intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person or entity other than MTVN and Licensee.

 

END OF ADDITIONAL TERMS AND CONDITIONS

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