EXHIBIT 10.19
SPONSORSHIP AND DEVELOPMENT AGREEMENT
This Agreement is made as of November 17, 2004 (the "Effective Date") 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 Xxxxx
Xxxx Racing, Inc. ("Rice"), c/o ___________________________________________.
RECITALS
TDA is in the business of developing and publishing interactive
entertainment software products. TDA desires to have Rice assist in the
development, endorsement and publicizing of TDA's Indy Racing Type and NASCAR
Type-related software products.
THEREFORE, TDA and Rice agree as follows:
1. DEVELOPMENT, PRODUCTION, COMMERCIAL AND PUBLICITY SERVICES
1.1 General. Rice agrees to cooperate, consult with and aid TDA in
connection with the development of TDA's "Indy Racing Type and NASCAR Type
Product" (hereinafter defined) and the advertising, marketing and publicity
thereof. As used herein, the term "Indy Racing Type and NASCAR Type Product"
shall mean any interactive entertainment software product related to the sport
of Indy Racing Type and NASCAR Type which is produced and released during the
"Term" (hereinafter defined in Section 6.l) and which may be published in
multiple versions (e.g., versions for play on game consoles, personal computers,
handheld mobile devices (including cell phones), for sale in any and all
territories.
2. GRANT OF RIGHTS; COOPERATION
2.1 Publicity Rights. Rice hereby grants to TDA the following rights (the
"Rights"):
(a) the right to use and reuse Rice's name, voice, likeness,
facsimile signature, personal statistics, biographical information and any
reproduction or simulation thereof ("Rice's Likeness") in TDA's Indy
Racing Type and NASCAR Type Products and on packaging for TDA's Indy
Racing Type and NASCAR Type Products in any fashion, said grant of rights
being limited to the world (the "Contact Territory");
(b) the right to use and reuse Rice's Likeness in TDA'S general
internal, nonpublic corporate promotional materials (such as TDA's Annual
Report), corporate advertising and in other forms of publicity;
(c) the right to use and reuse Rice's Likeness in and in connection
with the marketing, advertising, promoting and publicizing of TDA's Indy
Racing Type and NASCAR Type Products, by any and all means now known or
hereafter developed;
(d) the exclusive right to use and reuse the results and proceeds of
the Services provided in connection with TDA's Indy Racing Type and NASCAR
Type Products; and
(e) with Rice's prior reasonable approval, the right to license to
third parties any of the foregoing rights but only in connection with or
directly related to the marketing and sale of TDA's Indy Racing Type and
NASCAR Type Products.
Rice agrees to cooperate in good faith with TDA in connection with TDA's
exercise of the Rights in accordance with the terms 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 its Indy Racing Type and NASCAR Type Products. TDA does
not have the right to use the Rights in any product whatsoever released
before or after the Term.
(b) TDA shall not utilize Rice's Likeness in a manner that would
constitute an endorsement of any product or service other than TDA's Indy
Racing Type and NASCAR Type Products.
2.3 Rice as Featured Player. TDA agrees that Rice will be one of the
featured players on all packaging of and promotional materials related to, TDA's
Indy Racing Type and NASCAR Type Product.
2.4 No Obligation to Use. Except as set forth in Section 2.3 above, the
payment to Rice of the sums required under this Agreement shall fully discharge
all obligations of TDA to use Rice's Likeness under this Agreement.
2.5 Approvals. TDA agrees that no use of Rice's Likeness in connection
with the product concepts or on their packaging or advertisements, promotions
and other related/similar materials will be made hereunder unless and until the
same has been approved by Rice in writing. Rice agrees that any material,
advertising or otherwise, submitted for approval as provided herein may be
deemed by TDA to have been approved hereunder if the same is not disapproved in
writing within fourteen (14) days after receipt thereof. Rice agrees that any
material submitted hereunder will not be unreasonably disapproved and, if it is
disapproved, that TDA will be advised of the specified rounds therefore. TDA
agrees to protect, indemnify and save harmless Rice and Rice'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. TDA will not depict
Rice in a disparaging manner in the Products, packaging, or advertising
materials.
3. EXCLUSIVITY
3.1 Exclusivity Period. During the Term (the "Exclusivity Period"), Rice
hereby represents, warrants and agrees that he will not, other than with regard
to any group video game licensing agreements: (i) reader any services in
commercials or advertisements on behalf of any computer game or videogame sports
software product or service, or (ii) authorize the use to Rice's Likeness in
connection with any computer game or videogame sports software product or
service. These exclusivity obligations will not limit Rice's right to appear in
any of the entertainment fields or in the entertainment portion of any
television, film or video program; provided, however, that Rice may not appear
in, or provide services in connection with, advertisements for any computer game
or videogame sports products. Notwithstanding anything herein to the contrary,
this Section 3.1 is specifically subject to the provisions of Section 2.2 above.
Rice'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". Notwithstanding anything herein to the contrary, TDA explicitly
agrees that nothing herein shall preclude Rice from participating in, or in any
way limit Rice's participation in, any current or future IRL and/or NASCAR group
video game licensing arrangements.
4. COMPENSATION
4.1 Products. TDA will provide to Rice, free of all costs whatsoever
(including without limitation, taxes, duties, shipping and/or handling fees) (a)
fifty (50) copies each of TDA's "Xxxxx Xxxx Indy Racing Type and NASCAR Type"
game mobile, handheld devices, game console and personal computer promptly after
TDA's release thereof and (b) fifty (50) copies of any other TDA products
selected by Rice.
4.2 Compensation for Rights and Services. TDA agrees to pay Rice, as a
consideration for the Rights and Services,
1) 20% royalty of TDA net mobile sales price of Indy Racing Type and
NASCAR Type product that will be sold as a monthly subscription at $2.50
to $3.00 per month less third party (telecom's) distribution/development
costs. These costs average 33% of gross sales price depending on the
carrier.
2) 10% of all game console and personal computer game sales on a
wholesale basis. For example, if retail price is $50 and the company sells
to distributor for $20, Rice would receive 10% of $20 or $2 per game sold.
3) The option to convert 10% of the royalty agreement as set forth
in section 4.2(2) into the following during the first two years of this
agreement:
a. 100,000 Restricted (under Rule 144) common shares TDA,
and
b. Warrant to purchase 250,000 shares at $2.50/share for
three years from the effective date of this agreement.
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All payments due under this Agreement shall be made in the form of a check drawn
to the order of "Xxxxx Xxxx Racing, Inc." and delivered to Rice's agent at the
following address: _____________________________________. Payments shall be made
15 days from the end of each quarter. Rice's net payment after any such charges
or deductions shall equal the amount set forth above. 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.
4.3 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 Rice and a guest designated by Rice
will be paid by TDA or reimbursed by TDA to Rice where necessary in the
performance of Rice's Services under this Agreement; provided, however, that
such expenses are required and reasonable for a celebrity of Rice's stature.
5. AUDIT
5.1 TDA, the Licensee, shall keep accurate books of account and records at
principal place of business covering all transactions relating to the License
granted herein. Rice shall have the right to engage an independent accounting
firm to examine the Licensee's sales information and all other books and records
necessary to establish the accuracy and timeliness of the royalty statements
required hereunder. Such examination shall be at the premises of Licensee on ten
(10) working days written notice and during normal business hours. The
information provided to Rice 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 Licensee
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 Rice or any third party. The accounting firm shall be bound by a
non-disclosure agreement in the firm to be provided by Licensee to ensure
compliance with this paragraph. The examination may be conducted not more than
once a year. If it is determined that Licensee has made any Royalty underpayment
which is greater than five percent (5%) for any Royalty Period, the Licensee
shall reimburse Rice for the costs and expenses of such audit.
5.2 Upon request by Rice, but not more than once each year, TDA the
Licensee, shall, at its own cost, furnish to Rice within thirty (30) days after
such request a detailed statement prepared by Licensees 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 Rice'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 Licensee during the
aforementioned time period.
5.3 All books of account and records of Licensee covering all transactions
relating to the Licensee shall be retained by the Licensee until at least two
(2) years after the expiration or termination of the Term for possible
inspection by Rice.
6. TERM
6.1 Term. The term of this Agreement (the "Term"), shall commence on the
Effective Date and terminate at the end of the Exclusivity Period (i.e, a three
(3) year period commencing on the Effective Date).
6.2 Post-Term Sales. Upon expiration of this Agreement, TDA shall cease
all uses of the Rights and/or Rice's Likeness with respect to advertising,
endorsing and/or promoting TDA, but TDA shall be free to continue to distribute
and sell its Indy Racing Type and NASCAR Type Products which incorporate Rice's
Likeness for up to 90 days after the expiration of the Term (although TDA may
not use the Rights or Rice's Likeness to promote or advertise TDA or any of
TDA's non-Indy Racing Type and NASCAR Type Products when selling the Indy Racing
Type and NASCAR Type Products, nor can TDA highlight Rice's Likeness in its
packaging or sales efforts); provided, however, that TDA shall have no such
right of post-Term sales unless TDA is not in default of any of its obligations
hereunder as of the date of expiration or termination.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Representations and Warranties.
(a) Rice represents and warrants that:
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(i) Rice has full right to enter into this Agreement and to
perform all of his obligations hereunder without, to his knowledge,
violating the legal or equitable rights of any person, firm or
entity and that TDA shall not 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 Rice by TDA under this
Agreement;
(ii) Rice will perform the Services in a professional and
workmanlike manner, to the extent of Rice'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 and that Rice shall not be under any obligation for the
payment of any commissions or fees to any person, firm or entity
related to or connected with TDA on account of this Agreement.
(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 Indy Racing Type and NASCAR
Type, (IRL and NASCAR) any other professional or amateur Indy Racing Type
and NASCAR Type 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 from the IRL and/or NASCAR or any other appropriate rights
holder.
7.2 Further Assurances and Execution of Documents. Rice will, if requested
and reasonable, furnish affidavits and other appropriate documentation that may
be required, in TDA's reasonable judgment and at TDA's expense, to comply with
any applicable governmental or other regulations, broadcast clearance
procedures, or sports/entertainment industry guidelines relating to product
endorsement. Furthermore, Rice hereby agrees to execute any and all documents
which are required by any guild or union having jurisdiction over any of the
services to be provided by Rice under this Agreement.
7.3 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. Rice will not authorize or release advertising matter or
publicity nor give interviews which make reference to the details of the
material terms of this Agreement, without TDA's prior written approval, although
Rice may, during interviews, respond, discuss and comment in a non-disparaging
manner that Rice is associated with TDA and its Indy Racing Type and NASCAR Type
Products.
8. OWNERSHIP OF PROPRIETARY RIGHTS
8.1 All right, title and interest in and to TDA's Indy Racing Type and
NASCAR Type Products shall be and remain the absolute property of TDA forever
(it being understood that after the Term TDA may continue to manufacture,
promote, sell and/or distribute its other Indy Racing Type and NASCAR Type
interactive entertainment sports products which are separate and distinct from
the Indy Racing Type and NASCAR Type Products incorporating Rice's Likeness on
the packaging without being subject to any of the limitations or restrictions
herein, provided that the Rights are not (directly or indirectly) utilized by or
incorporated in such other Indy Racing Type and NASCAR Type interactive sports
products. All right, title and interest in and to the Results and Proceeds and
to the Advertising Materials (as defined below) shall be and remain the absolute
property of TDA forever (but which may only be used during the Term and, subject
to the limitations and conditions set forth in this Agreement, thereafter).
Without limiting the foregoing, TDA shall, during the Term (and, subject to the
limitations and conditions on the Rights as set forth in this Agreement,
thereafter) have the full and complete right to revise, telecast, broadcast,
use, distribute, reproduce, record, publish, print, license, copyright and
exhibit the contents of any Results and Proceeds, the Indy Racing Type and
NASCAR Type Products and any Advertising Materials and any versions or revisions
thereof and, in TDA's sole discretion, the Results and Proceeds, the Indy Racing
Type and NASCAR Type Products and Advertising Materials may be made by any
process, instrumentation or device now known or hereafter developed and may be
made or adapted for use in any and all media now known or hereafter developed
(although it is acknowledged and agreed by TDA that multi-media usage (except,
of course, as
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incorporated into TDA's Indy Racing Type and NASCAR Type Products) shall be
strictly limited to advertising) provided that any and all such uses are
directly related to the marketing, development and sale of TDA's Indy Racing
Type and NASCAR Type Products. Rice further acknowledges that TDA may adapt and
use, and protect by any means including registration with the appropriate
authorities, a trademark or trade name incorporating Rice's Likeness, and that
Rice shall, until after the Term, have no right, title or interest in or to any
such trademark, trade name or related goodwill. As used in this Agreement,
"Advertising Material" means any commercials, print materials, copy,
advertising, promotional and publicity materials published under this Agreement
which include or make reference to Rice's Likeness and all elements thereof.
8.2 Notwithstanding anything herein to the contrary and only with Rice's
approval, TDA agrees not to use the trademarks and logos of Rice's equipment
manufacturer from the packaging of TDA's Indy Racing Type and NASCAR Type
Products and/or the Advertising Materials.
9. INDEMNITY
9.1 By TDA. TDA shall indemnify and hold harmless Rice, Rice's agent, and
Rice's heirs, executors and legal representatives 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 Rice in any Advertising Materials produced or used by TDA hereunder, (b)
TDA's default, breach, negligence, errors and/or misconduct hereunder, and/or
(c) any claim arising from any third party's use or association with TDA's
products.
9.2 Insurance. TDA shall arrange for Rice to be named as an insured on the
Company's $1,000,000 product liability insurance policy before the product is
released.
10. GENERAL
10.1 Taxes. Rice represents and warrants that, in performing its
obligations under this Agreement, Rice does so as an independent contractor and,
without limiting the foregoing, Rice 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 and Rice further
agrees to file any returns or reports necessary in connection therewith. TDA
shall have the right to deduct from any amounts payable hereunder such portion
thereof as are required to be deducted under applicable statute, regulation,
treaty or other law, and Rice shall promptly execute and deliver to TDA such
forms and other documents as may be required in connection therewith.
10.2 Notices. All notices and statements hereunder required to be given to
TDA shall be sent to TIDA at its address stated at the beginning of this
Agreement, to the attention of the General Counsel, and all notices to Rice
shall be sent to Rice at the address stated at the beginning of this Agreement,
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 if 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 Rice and TDA with the
other party's prior written approval. Except with Rice'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
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reorganization, or the sale of substantially all of TDA's rights to all of its
Indy Racing Type and NASCAR Type 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, Rice's default
hereunder) shall Rice be liable to TDA (or any entity claiming through TDA) for
any amount in excess of the amounts actually received by Rice hereunder,
excluding the reimbursement of expenses. Under no circumstances xxxx Xxxx 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 Applicable Law and Disputes. This Agreement shall be governed by the
laws of the State of Arizona applicable to agreements fully executed and
performed therein. Any claims arising hereunder or relating hereto shall be
prosecuted only in the appropriate court of the State of Arizona or in the
applicable United States District Court and neither party shall make any claim
or demand in any other jurisdiction forum. Each party waives its right to a
trial by jury and agrees to the jurisdiction of the judge in the appropriate
court as governed by the State of Arizona. The parties consent to the personal
jurisdiction of such courts and to the service of process by mail.
10.11 Force Majeure. If at any time during this Agreement, Rice 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 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 be a breach
of this Agreement.
10.12 Reservation of Rights. All rights not herein specifically granted to
TDA shall remain the property of Rice to be used in any manner Rice deems
appropriate. TDA understands that Rice has reserved the right to authorize
others to use Rice's Likeness within the Contract Territory and during the Term
in connection with all tangible and intangible items and services other than
TDA's Indy Racing Type and NASCAR Type Products as specifically set forth
herein.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
Effective Date by signing below:
TEKNIK DIGITAL ARTS INC. XXXXX XXXX RACING, INC.
By: /s/ Xxxx Xxxx By: /s/ Xxxxx Xxxx
------------------------------ -------------------------------
Name: Xxxx Xxxx Name: Xxxxx Xxxx
Title: Chairman Title:
Date: November 17, 2004 Date: November 17, 2004
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