EXHIBIT 10.14
SPONSORSHIP AND DEVELOPMENT AGREEMENT
This Sponsorship and Development Agreement (the "Agreement") is made as of
August 5, 2004 (the "Effective Data") by and between TEKNIK DIGITAL ARTS INC., a
Nevada corporation with offices at 0000 X. Xxxxxxxxxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxx 00000 ("TDA") and INDEPENDENT GOLF RESEARCH CORPORATION, a
Texas corporation with offices at 1310 RR 620 South, Ste. B-1, Austin, Texas
78734 ("IGR").
RECITALS
TDA is In the business of developing and publishing interactive
entertainment software products. TDA desires to have IGR assist in the
development, endorsement and publicizing of TDA's golf instruction related
software products.
THEREFORE, TDA and IGR agree as follows:
1. DEVELOPMENT, PRODUCTION, COMMERCIAL AND PUBLICITY SERVICES
1.1 General. IGR agrees to provide TDA with standard VHS video tape of
Xxxx Xxxx ("Xxxx") presenting 54 tips (at the rate of at least 18 tips per year)
covering the golf short game or putting (such IGR services, the "Services").
From such video tape of each tip, TDA shall produce an instructional segment
(each of 60 to 90 seconds in length). Prior to producing each segment, TDA shall
present IGR with a "design document" which shall specify the precise content of
the instructional segment. No such design document produced by TDA shall be
deemed complete until approved in writing by IGR as to appearance, content and
all other matters. The instructional segment shall conform to the design
document and any change must be approved in writing by IGR. Any segment approved
in accordance with this paragraph shall be referred to herein as a "Segment".
2. GRANT OF RIGHTS; COOPERATION
2.1 Publicity Rights. Subject to the terms and conditions of this
Agreement, IGR hereby licenses to TDA the following rights
(the "Rights") during the Term:
(a) the right to use the Segments solely in TDA's Xxxx Xxxxxxxxx
Game for use on handheld mobile devices such as cell phones, personal data
assistants and similar wireless handheld mobile devices (the "Product").
The term Product shall include any other TDA product only to the extent
IGR explicitly agrees in writing that such other product shall be deemed a
"Product" for purposes of this Agreement;
(b) the right to use end reuse Xxxx'x name, voice, likeness,
facsimile signature (for non-legally binding purposes), personal
statistics, biographical information and any reproduction or simulation
thereof (`Xxxx'x Likeness") in the Product and on packaging for the
Product, said grant of rights being limited to the world (the "Contract
Territory")";
(c) the right to use and reuse Xxxx'x likeness in the marketing,
advertising, promoting and publicizing of the Product, by any and all
means now known or hereafter developed; and
(d) with IGR's prior written approval with respect to each third
party, the right to license to third parties any of the foregoing rights
but only for the marketing and sale of the Product.
Both parties agree to cooperate in good faith in connection with the performance
of this Agreement.
2.2 Limitations of License
(a) The Rights granted in Section 2.1 above will only be used by TDA
in connection with the Product. TDA does not have the right to use the
Rights in any product whatsoever after the Term, except as set forth in
Section 6.2.
(b) TDA shall not utilize Xxxx'x Likeness in a manner that would
constitute an endorsement of any product or service other than the
Product.
2.3 Xxxx as Featured Short Game and Putting Instructor. TDA agrees that
Xxxx will be the featured Short Game and Putting Instructor on all packaging of,
and promotional materials related to the Product.
2.4 No Obligation to Use. Except as set forth in Section 2.3 above, the
payment to IGR of the sums required under this Agreement shall fully discharge
all obligations of TDA to use Xxxx'x Likeness under this Agreement.
2.5 Approvals. Notwithstanding anything to the contrary herein, TDA agrees
that no use of Xxxx'x Likeness will be made hereunder unless and until the same
has been approved by IGR (in its sole discretion) in writing. IGR agrees that if
IGR does not approve any use of Xxxx'x Likeness that TDA will be advised of the
specified grounds therefore. TDA agrees to protect, indemnify and save harmless
IGR and IGR's agents, or either of them, from and against any and all expenses,
damages, claims, suits, actions, judgments and costs whatsoever, arising out of,
or in any way connected with, any advertising material furnished by, or on
behalf of, TDA.
3. EXCLUSIVITY
3.1 Exclusivity Period. During the Term, IGR hereby represents, warrants
and agrees that: (i) Xxxx will not appear in commercials or advertisements on
behalf of any mobile video game designed primarily for use on cell phones or
personal data assistants or similar wireless handheld mobile devices that
directly competes with the Product, or (ii) authorize the use of Xxxx'x Likeness
in any mobile video game designed primarily for use on cell phones or personal
data assistants or similar wireless handheld mobile devices that directly
competes with the Product. These exclusivity obligations will not limit Xxxx'x
right to appear in any of the entertainment fields or in the entertainment
portion of any television, film or video program (regardless of the sponsors
thereof); provided, however, that Xxxx shall not endorse any mobile video game
designed primarily for use on cell phones or personal data assistants or similar
wireless handheld mobile devices that directly competes with the Product. IGR's
obligations set forth in this Section 3.1, and as limited by Section 2.2, will
be referred to elsewhere in this Agreement as the "Exclusivity Obligations".
4. COMPENSATION
4.1 Products. TDA will provide to IGR, free of all costs whatsoever
(including without limitation, subscription fees, license fees, taxes, duties,
shipping and/or handling fees) (a) fifty (50) copies of the Product promptly
after TDA's release thereof and (b) fifty (50) copies of any other TDA products
selected by TDR.
4.2 Compensation for Rights and Services.
(a) Upon execution of this Agreement, TDA shall issue and deliver
25,000 shares of Common Stock of TDA (the "Stock") to IGR as consideration
for executing this Agreement.
(b) As consideration for the Rights and Services, TDA shall pay to
IGR a royalty equal to 25% of revenues received by TDA in connection with
the license, sale or other grant of rights with respect to the Product.
TDA estimates that this royalty will equal $1 to $2 per subscriber, per
month.
(c) As consideration for the Rights end Services, TDA shall also pay
to IGR a royalty equal to 25% of the net game sponsorship revenue. Net
sponsorship revenue is defined as gross sponsorship revenues less 50% of
TDA's cost of placing (i.e. amounts paid to external agents or ad
agencies) game sponsors. The royalties required by part (b) and (c) shall
be referred to herein as the "Royalties."
4.3 Option. IGR may elect in writing at any time during the Term to
receive Common Stock (also "Stock") in lieu of cash with respect to all or any
portion of the Royalties under this Agreement. In lieu of each $1 of cash
foregone by IGR pursuant to this provision, IGR shall receive $10 worth of Stock
(valued at (i) if TDA's Common Stock is publicly-traded, the average daily
closing price over the six mouths preceding IGR's election or (ii) if TDA's
Common Stock is not publicly-traded. the most recent price paid in a voluntary.
arms-length transaction prior to IGR's election). In no event shall IGR be
entitled, pursuant to this provision, to receive Stock in lieu of cash to the
extent such Stock (together with all other Stock issued to IGR under this
Agreement) would exceed 50% of TDA's then outstanding stock.
4.4 Manner of Payments. All payments due under this Agreement shall be
made in the form of a check drawn to the order of "Independent Golf Research
Corporation" and delivered to IGR at the following
address: 0000 XX 000 Xxxxx, Xxx. X-0, Xxxxxx, Xxxxx 00000. Payments shall be
made within 15 days of the end of each calendar quarter with respect to all
revenues received during such calendar quarter (each such calendar quarter, a
"Royalty Period"), including any period covered by Section 6.2. Past due
payments hereunder shall bear interest at the rate of (i) one and one-half
percent (1-1/2%) per month, or (ii) the maximum interest rate permissible under
law, whichever is less.
4.5 Expenses. First-class round-trip air transportation, hotel room meal
expenses, local limousine service and miscellaneous expenses (e.g., telephone
and overnight courier charges) incurred by IGR for Xxxx and a guest designated
by IGR will be paid by TDA or reimbursed by TDA to IGR where necessary in the
performance of this Agreement or when travel is otherwise requested by TDA.
5. AUDIT
5.1 TDA shall keep accurate books of account and records at its principal
place of business covering all transactions relating to this Agreement. IGR
shall have the right to engage an independent accounting firm to examine TDA's
sales information and all other books and records necessary to establish the
accuracy and timeliness of the Royalties required hereunder. Such examination
shall be at the premises of TDA on ten (10) working days written notice and
during normal business hours. The information provided to IGR by the accounting
firm will be the net sales and the application of the appropriate royalty rate
to calculate royalties due. The accounting firm shall be required to take
reasonable steps to hold all TDA information confidential. Details of the review
and all work papers and related supporting data pertaining to the review will be
held confidential by the accounting firm and will not be shown, divulged, or
delivered directly or indirectly to IGR or any third party. The accounting firm
shall be bound by a reasonable non-disclosure agreement to ensure compliance
with this paragraph. Notwithstanding anything to the contrary, no such
confidentiality obligation shall restrict the accounting firm in the event of
litigation or similar proceeding with respect to this Agreement. The examination
may be conducted not more than once a year. If it is determined that TDA has
made any Royalty underpayment which is greater than five percent (5%) for any
Royalty Period, TDA shall reimburse IGR for the costs and expenses of such
audit.
5.2 Upon request by IGR, but not more than once each year, TDA shall, at
its own cost, furnish to IGR within thirty (30) days after such request a
detailed statement, prepared by TDA's Chief Financial Officer, setting forth the
number of Products manufactured from the later of the commencement of this
Agreement or the date of any previous such statement up to and including the
date of IGR's request therefore and also setting forth the pricing information
for all Products (including the number and description of the Products) shipped,
distributed and sold by TDA during the aforementioned time period.
5.3 All books of account and records of TDA covering all transactions
relating to TDA shall be retained by TDA until at least two (2) years after the
expiration or termination of the Term for possible inspection by IGR.
6. TERM
6.1 Term. The term of this Agreement shall commence on the Effective Date
and terminate on August 4, 2007 or the earlier termination of this Agreement
pursuant Section 6.3 (the "Term).
6.2 Post.-Term Sales. At and following the end of the Term, TDA shall
cease all uses of the Rights and Xxxx'x Likeness, except that TDA shall be free
(subject to the limitations set forth in this Agreement) to continue to
distribute and sell the Products which incorporate Xxxx'x Likeness for up to 180
days after the termination or expiration of the Term; provided, however, that
XXX shall have no such right of post-Term sales if TDA has breached any of its
obligations hereunder.
6.3 Termination. Without limiting any rights or remedies, this Agreement
may be terminated by written notice by IGR in the event that TDA breaches any of
its representations, warranties or obligations hereunder or TDA becomes
insolvent or subject to any proceeding under any bankruptcy, insolvency or
liquidation law, whether voluntary or involuntary.
6.4 Effect of Termination. Following end of the Term, TDA shall remain
liable for all amounts owed hereunder and TDA's indemnification obligations set
forth herein shall remain in full force and effect.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties.
(a) IGR represents and warrants that:
(i) IGR has full right to enter into this Agreement and to
perform all of his obligations hereunder without, to IGR's
knowledge, violating the legal or equitable rights of any person,
firm or entity and TDA shall not, by virtue of any agreement entered
into by IGR, be under any obligation for the payment of any
commissions or fees to any person, firm or entity on account of this
Agreement, other than advances, compensation, royalties and expenses
expressly payable to IGR by TDA under this Agreement;
(ii) IGR will perform the Services in a professional and
workmanlike manner, to the extent of IGR's professional abilities.
(b) TDA represents and warrants that:
(i) TDA has full right to enter into this Agreement and to
perform all of its obligations hereunder without, to its knowledge,
violating the legal or equitable rights of any person, firm or
entity. IGR shall not be under any obligation for the payment of any
commissions or fees to TDA or any person, firm or entity related to
or connected with TDA on account of this Agreement.
(ii) TDA has secured full rights to produce, market and sell
the Product and will use all reasonable efforts to produce, market
and sell the Product.
(iii) TDA has recently sold shares of Common Stock in a
voluntary, arms-length transaction at a price or $2.50 per share.
The par value of the Common Stock is $0.0001 per share. The
Certificate of Incorporation of TDA in the form attached as Exhibit
A hereto is the current and effective ---------- Certificate of
Incorporation of TDA and has not been amended. TDA's outstanding
capital stock consists of 8,000,000 shares of Common Stock and no
outstanding Preferred Stock. All of the issued and outstanding
shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. There are no subscriptions,
warrants, options, convertible securities or other rights
(contingent or otherwise) to purchase or acquire any shares of
capital stock of TDA and TDA has no obligation (contingent or
otherwise) to issue any of the foregoing. TDA plans to register
3,000,000 shares of Common Stock for sale in a public offering.
(iv) The issuance and delivery of the Stock pursuant to this
Agreement has been duly authorized by all necessary corporate action
on the part of TDA and its officers, directors and stockholders, and
all such shares of Stock have been duly reserved for issuance. The
Stock issued pursuant to this Agreement is (a) fully vested, duly
and validly issued, fully paid and non-assessable, with no personal
liability attaching to ownership thereof, (b) free and clear of all
liens, charges, restrictions, claims and encumbrances and (c) free
of restrictions on transfer other than restrictions on transfer
imposed under applicable state and federal securities laws.
(c) Notwithstanding anything herein to the contrary, TDA agrees that
nothing contained herein shall be construed to convey to TDA any rights to
use the trademarks, logos or uniform of the PGA TOUR ("PGA") or any other
professional or amateur golf instruction-related association (including
any member players of such association) in conjunction with the rights
granted hereunder. All rights to the use of such trademarks, logos or team
identification must be acquired by XXX from the PGA or any other
appropriate rights holder.
7.2 Confidential Information and Non-Disparagement. Neither party will
disclose or use any confidential or proprietary information that such party
obtains from or about the other or its products. Both parties agree that the
existence and results of any arbitration held pursuant to this Agreement will be
treated confidentially. Neither IGR nor TDA will authorize or release
advertising matter or publicity or give interviews which make reference to the
details of the material terms of this Agreement without the other party's prior
written approval, although IGR may, during interviews, respond, discuss and
comment in a non-disparaging manner that IGR is associated with TDA and the
Products.
8. OWNERSHIP OF PROPRIETARY RIGHTS
8.1 Subject to Section 8.2, all right, title and interest in and to the
Product and the Advertising Materials (as defined below) shall be and remain the
absolute property of TDA forever. As used in this Agreement, "Advertising
Material" means any commercials, print materials, copy, advertising, promotional
and publicity materials published under this Agreement to promote sales of the
Product which include or make reference to Xxxx'x Likeness and all elements
thereof.
8.2 Notwithstanding anything herein to the contrary, IGR shall retain all
copyrights, trademarks and other rights in and to the Segments, the video tape
and with respect to the Xxxx'x Likeness, and all Rights licensed hereunder shall
revert automatically to IGR upon the end of the Term. TDA agrees and
acknowledges that TDA shall not acquire any rights of any kind whatsoever in the
trademarks as a result of TDA's use thereof, and all uses thereof by TDA shall
at all times inure to the benefit of IGR. TDA acknowledges IGR's title to
trademarks, and TDA shall not, at any time, directly or indirectly, attack the
validity of IGR's trademarks or of the license thereto herein granted.
9. INDEMNITY
9.1 By TDA. TDA shall indemnify and hold harmless IGR, IGR's employees,
officers and agents, and any of their successors and assigns from and against
any and all damages, costs, judgments, penalties and expenses of any kind
(including reasonable legal fees and disbursements) which may be obtained
against, imposed upon or suffered by any of them as a result of (a) any claims
or representations made by IGR in any Advertising Materials produced or used by
TDA hereunder, (b) TDA's default, breach, negligence, infringement, errors
and/or misconduct hereunder, and/or (c) any claim arising front any third
party's use or association with TDA's products, including the Product.
10. GENERAL
10.1 Taxes. IGR represents and warrants that, in performing its
obligations under this Agreement. IGR does so as an independent contractor and,
without limiting the foregoing, IGR assumes exclusive responsibility for the
collection and payments of all employer and employee contributions and taxes
under all applicable laws now in effect or hereafter enacted with respect to
IGR's employees and IGR further agrees to file any returns or reports necessary
in connection therewith.
10.2 Notices. All notices and statements hereunder required to be given to
TDA shall be sent to TDA at its address stated at the beginning of this
Agreement, to the attention of the General Counsel, and all notices to IGR shall
be sent to IGR at the address stated at the beginning of this Agreement, to the
attention of the Chief Operating Officer, unless either party notifies the other
party in writing if a change of address in accordance with the provisions of
this Section. Notices are deemed to be received by the addressee of the notice
on the earlier or the date the notice is actually delivered to the addressee
and: (i) three (3) days after the notice is sent by certified mail, postage
prepaid. return receipt requested; (ii) the next business day after the notice
is sent by confirmed fax transmission; or (iii) on the date of guaranteed
delivery of the notice is sent by recognized national or international express
courier.
10.3 Right of Offset. Notwithstanding any provision contained in this
Agreement, neither party will be prohibited from exercising any right of offset
that may be available at law.
10.4 Governing Law. This Agreement will be deemed entered into in Arizona
and will be governed by and interpreted in accordance with the internal
substantive laws of the State of Arizona without reference to conflicts of law
provisions.
10.5 Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof, and all
prior agreements and understandings, whether oral or written, are hereby
superseded in their entirety. No waiver, modification or addition to this
Agreement shall be valid unless in writing and signed by the party sought to be
charged therewith.
10.6 Assignment. This Agreement may be assigned by IGR and TDA with the
other party's prior written approval. Except with IGR's prior written approval,
this Agreement may not be assigned by TDA: (i) in connection with a merger, a
sale of all or substantially all of the assets of TDA or other similar corporate
reorganization, or the sale of substantially all of TDA's rights to all of its
Golf Instruction Related Products; or (ii) to an affiliated, parent, subsidiary,
related company (or in the case of the production of Advertising Materials to an
advertising agency representing TDA) so as to effectuate the intent of this
Agreement and the subject matter hereof, although TDA will continue to be liable
for all financial obligations hereunder.
10.7 Severability. Should any provision of this Agreement be held to be
void, invalid or inoperative, such provision will be enforced to the extent
permissible and the remaining provisions of this Agreement will not be affected.
10.8 Attorney's Fees. In any suit, arbitration or other proceeding under
this Agreement, the prevailing party will be entitled to recover its reasonable
fees and expenses of attorneys and other professionals, including all fees and
expenses of appeal and enforcement.
10.9 Liability. In no event (including, but not limited to, IGR's default
hereunder) shall IGR or IGR's agents be liable to TDA (or any entity claiming
through TDA) for any amount in excess of the amounts actually received by IGR
hereunder, excluding the reimbursement of expenses. Under no circumstances will
IGR be liable to TDA or any other entity for any special, consequential,
indirect, exemplary and/or punitive damages, or for loss of good will or
business profits.
10.10 Force Majeure. If at any time during this Agreement, IGR or TDA is
prevented from or hampered or interrupted or interfered with in any manner
whatever in fully performing their respective duties hereunder by reason of any
present or future statute, law, ordinance, regulation, order, judgment or
decree, whether legislative, executive or judicial (whether or not valid), act
of God, earthquake, flood, fire, epidemic, accident, explosion, casualty,
lockout, boycott, strike, labor controversy (including, but not limited to
threat of lockout, boycott or strike), riot, civil disturbance, war or armed
conflict (whether or not there has been an official declaration of war or
official statement as to the existence of a state of war), invasion, occupation,
intervention or military forces, act of public enemy, embargo, delay of a common
carrier, inability without fault of such party to obtain sufficient material,
labor, transportation, power or other essential commodity required in the
conduct of business; or by reason of any event beyond any of the foregoing
parties' reasonable control (e.g., illness, family emergency, etc.); or by
reason of any other cause or causes of any similar nature (all of the foregoing
being herein referred to as an "event of force majeure"), then the applicable
party's obligations hereunder shall be suspended as often as any such event of
force majeure occurs and during such periods of time as such events of force
majeure exist and such non-performance shall not be deemed to he a breach of
this Agreement.
10.11 Reservation of Rights. All rights not herein specifically granted to
TDA shall remain the property of IGR to be used in any manner IGR deems
appropriate. TDA understands that IGR has reserved the right to authorize others
to use Xxxx'x Likeness within the Contract Territory and during the Term in
connection with all tangible and intangible items and services other than the
Product.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
Effective Date by signing below:
TEKNIK DIGITAL ARTS INC. INDEPENDENT GOLF RESEARCH
CORPORATION
By: /s/ Xxxx X. Xxxx By: /s/ XxXxx Xxxx
-------------------------- --------------------------------
Name: Xxxx X. Xxxx Name: XxXxxx Xxxx
Title: Chairman Title: President & COO
Date: August 17, 2004 Date: August 13, 2004
