Software Development And Licensing

Exhibit 10.12


DATE March 3, 2006


(1) RED MILE ENTERTAINMENT, INC


(2) IR GURUS INTERACTIVE PTY LTD


SOFTWARE DEVELOPMENT AND LICENSING

AGREEMENT


For


HEROES OVER EUROPE on PS3, Xbox 360 and PC


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THIS AGREEMENT is made on March 3, 2006


BETWEEN:


(1)

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

(2)

IG Gurus Interactive Pty Ltd, an Australian corporation whose principal address is Level 3, 355 Spencer Street, West Melbourne, Victoria 3003, Australia (the " Developer" or " Licensor" )


(A)

The Developer has a software development engine capable of creating the Product.

(B)

Publisher seeks to engage the Developer' s services to develop the Product.

(C)

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


AGREEMENT

1.

DEFINITIONS

1.1

In this Agreement:

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

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

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

" Beta Version" means the Version of the Product that is written by or for the Developer that is a complete running software Product containing ALL FEATURES of the Product and final-quality game assets, as specified in the Specification plus the incorporation of improvements, corrections and any other errors identified through testing of the Alpha Version of the Product. The Beta Version is a Version which is ready for Publisher to do its quality assurance testing and Developer is ready to fix Errors which may be found by Publisher during its " QA" testing and will include all Original Language assets and be Multi Byte Language compatible. It also includes


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such information and user instructions that the Publisher reasonably and requires to finish producing a User Manual in the Original Language;

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

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

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

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

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

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

(a)

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

(b)

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

(c)

any misspelled incorrect text;

(d)

any non-compliance of any Product with any part of the Specification;

" Gold Master" means:

(a)

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


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(c)

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

" Hardware Manufacturers" means Sony Computer Entertainment and Microsoft Corporation.

" Initial Machine" means the PlayStation 3, Xbox 360 and PC 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, neighbouring rights or rights analogous to any of the above under any jurisdiction, in each case registered or unregistered and existing now or in the future, including reversions and renewals of such rights and rights to make applications for registration of any such rights and Intellectual Property Rights shall include in particular all rights in any jurisdiction to copy, adapt, translate, broadcast, transmit, publish, perform, reproduce in any medium and otherwise exploit the work or materials concerned;

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

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

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

" Milestone Payment Schedule" means the schedule detailing the relevant fee charged by the Developer for the completion of each Milestone as detailed 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 an Asian language to be determined by the parties in connection with the preparation of Translations (as defined below) .

" Original Language" means American English.

" Product" means a PlayStation 3, Xbox 360 and PC game " Heroes over Europe" as more particularly defined in the attached Design Document (Exhibit A) to be produced by the Developer under this Agreement in respect of the Initial Machines 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;


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(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;

" Project Manager(s)" means the person at Developer responsible for the project management of Product and identified in Schedule 2;

" 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;

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

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

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

" Term" will mean beginning on the date shown on page one of this Agreement and ending ten years hence unless extended under the terms of " Renewal" . At the end of the Term, Publisher shall cease manufacturing any additional units of the Product. Publisher may continue to sell units in inventory for an additional three months (" Sell-off Period" ) beyond the term. Profits for sales of Products during the Sell-off Period shall be paid and remitted in accordance with paragraph 10

" Territory" means the universe;

" Translation" means a copy of a Version in which text and/or text related graphics and/or dialogue have been translated into French, German, Italian, Spanish, Dutch and one dialect of an Asian language in accordance with paragraph 9 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;


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

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

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

1.2

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

1.3

" Include" or " including" are used without limitation.

1.4

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

1.5

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

2.

INTELLECTUAL PROPERTY RIGHTS

2.1

License . Publisher acknowledges that Developer owns the intellectual property rights to the name " Heroes over Europe" and to an existing game by that name (" Existing Heroes over Europe" ). Publisher agrees to use such name for the Product in North America, Europe and Asia. In versions where Publisher uses the name " Heroes over Europe" as the title of the Product, the Product and the Gold Master shall be the sole and exclusive property of Developer. Publisher' s sole rights shall be those granted elsewhere in this Agreement.

2.1.1

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


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to completing an agreement with another Publisher, Developer shall offer the Product to Publisher on the same terms and conditions as agreed to with the other publisher. Publisher shall have ten (10) days to elect to match the offer or lose its rights to the other version(s).

2.1.2

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

2.1.3

Agreement not to Compete. So long as the Product is being actively sold by Publisher, Developer shall not create, for its own benefit or for another Publisher any product based on Heroes over Europe.

2.2

Developer' s Intellectual Property Rights.

(a)

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

(b)

For the avoidance of doubt Publisher shall not (and shall not authorize any third party to) (i) decompile, disassemble or otherwise reverse engineer the source code or underlying algorithms of the Product, regardless of name. This paragraph 2.2(b) shall not apply to software code delivered by Developer to Publisher in accordance with paragraph 9 provided that Publisher shall not use any such code for any purpose other than in order to create Translations.

3.

DEVELOPMENT

3.1

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


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and PC workstations. Such equipment will be returned upon completion of the Product.

3.2

The Developer shall achieve each of the Milestones by the relevant Milestone Date (Publisher to provide reasonable assistance to Developer in respect of meeting the relevant Milestone). On achieving each Milestone, the Developer shall, if requested to do so by the Publisher, deliver to the Publisher all materials relevant to the particular Milestone including in particular copies of the User Manual and Support Documentation with each Alpha and Beta Version. In addition, Publisher may request Developer deposit Source Code with a mutually agreed upon Escrow Agent in Australia. Publisher shall pay all fees of Escrow Agent. Under the terms of such escrow arrangement, Publisher may request release of the source code from escrow, only if Developer fails to perform such translations or refuses to create them and fails to cure such default as required by paragraph 9.2, below.

3.3

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

3.4

The Developer shall appoint a Project Manager who shall liaise with the Publisher during development of the Product. In addition, Developer must identify the key team members on Schedule 2. The original key team members and any subsequent changes to the key team members are subject to approval by Publisher.

3.5

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

3.6

Publisher shall be responsible for submitting the Gold Master candidate to the Hardware Manufacturers for approval within five (5) days of receiving the Gold Master approval from the Developer. Developer and Publisher shall work together in good faith to obtain approval of the Gold Master candidate from the Hardware Manufacturers. Should the Gold Master candidate be rejected by either Hardware Manufacturer and such rejection is not due to the acts or omissions of Publisher, and the Developer and Publisher together are unable to correct such deficiencies and obtain approval of the Gold Master by Hardware Manufacturer, Publisher or Developer may terminate this Agreement in accordance with paragraph 16.2.

3.7

Developer shall deliver, at its own cost, the Marketing Deliverables included on Schedule 5. Such Marketing Deliverables are material deliverables for meeting the Milestone commitments.


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4.

DELIVERY AND ACCEPTANCE

4.1

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

4.2

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

4.2.1

it accepts and approves that Version unconditionally; or

4.2.2

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

4.2.3

it does not accept or approve that Version

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

4.3

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

4.4

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

4.5

The Developer shall deliver to the Publisher the Gold Master of each Version by the relevant Delivery Date. For the avoidance of doubt, Developer shall deliver a Gold Master for the Original Language Version of the Product and a multi-language Version for all agreed Translations as required by the Hardware Manufacturers and Publisher, i.e., a US Gold Master for SCEA and one (1) multi-language Gold Master each for SCEE and for SCEI, respectively. The parties acknowledge that in the case of PS3 and Xbox 360, the Hardware Manufacturer shall have the final right to accept or reject such Master. In the case of rejection, Developer shall respond as if such rejection was made by Publisher and shall respond to such rejection in accordance with this paragraph 4.

5.

CHANGE CONTROL

5.1

A party may at any time by notice in writing to the other party suggest or request a change to the attached Design Document, where the proposed changes will have the


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effect of varying the Product. Such notice must clearly detail the nature of the proposed change (' Change Request' ).

5.2

Within 5 business days (or any longer period as the parties may reasonably agree) of rece ...