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Software Publishing And Distribution Agreement

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Exhibit 10.10


SOFTWARE PUBLISHING AND DISTRIBUTION AGREEMENT

Disney Aladdin Chess Adventure

This Publishing and Distribution Agreement (this " Agreement" ) is made as of the 18th day of April, 2005, by and between Strategy First Inc. , a Canadian corporation (" STRATEGY" ), whose principal place of business is at 147 St. Paul West, Suite 210, Montreal, Quebec (Canada) H2Y 1Z5 and Red Mile , a U.S. corporation (" RED MILE" ), whose principal place of business is at 4000 Bridgeway, Suite 101, Sausalito, CA 94965, U.S.A.


RECITALS

Whereas, RED MILE is a developer of computer game programs operable on various computer and video game consoles and systems; and

Whereas, STRATEGY is in the business of developing, producing, distributing, publishing and licensing computer software programs and video games and related documentation for use on the Systems; and

Whereas, STRATEGY desires a license to distribute the Products, and RED MILE desires to grant a license to distribute the Products.

AGREEMENT

In consideration of the foregoing recitals and the mutual agreements and promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.

DEFINITIONS.

The following terms, unless the context requires otherwise, have the following meanings:

a.

" Alpha" means the software includes all of the game' s major components, although not at final speed or with final data. All levels will run in the game engine, including lighting, collisions, and game play. All puzzles, random creature hot spots, and creature obstacles will be fully testable, including all bosses. It will also include NPCs and NPC interactions. The game will still have major bugs (i.e. crash bugs). All levels will be playable, although bugs may prevent playing any particular level from start to finish without resorting to cheats. In-game cinematics will be integrated and the game interfaces will be functional. Any additional visual and audio changes need to be made during this phase, and placeholders for art and voiceovers or sound effects may be necessary. In short, all game elements are accounted for either by being present in the build or by being represented by placeholders.

b.

" Beta" means the software includes all of the game' s major components in place and running with final speed and data. It will include all changes, modifications, alterations, and additions agreed to by STRATEGY and RED MILE based upon review and testing of the Alpha Milestone. The game will still have bugs, but major bugs (i.e. crash bugs) will have been addressed, including those impeding Player


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progression in the game. All levels are playable from start to finish. Note that assets are ' frozen' and implemented. Game runs on final media. Final audio is included. All necessary install materials have either been delivered to STRATEGY so that an install can be made by STRATEGY or, if agreed to by STRATEGY and RED MILE, the RED MILE has in place an install that meets all Publisher requirements.

c.

" Bug" means a repeatable phenomenon of unintended events or actions during the running of the software under normal conditions that results in: (i) the being unable to perform repeatedly and without interruption; (ii) a material detriment to the functionality of the software; (iii) a material detriment to the visual representation or sound of the software; or (iv) the destruction or corruption of data.

d.

" Chargeback" means deductions customers take against a STRATEGY invoice for price protection, promotions, allowances, or markdowns.

e.

" DISNEY" means Disney Interactive Inc. now known as Buena Vista Games.

f.

" End-Users" means those customers who acquire the Products for their internal use and not for redistribution, re-marketing, time-sharing, or service bureau use.

g.

" Gold Master" means the final version of the program as approved by both STRATEGY and RED MILE as suitable for duplication and shipping. It includes all changes, modifications, alterations, and additions agreed to by STRATEGY and RED MILE based upon review and testing of the Beta Milestone and/or previous Release Candidate(s).

h.

" Manufacturing Costs" means all reasonable direct costs of manufacturing, including in-bound transportation costs.

i.

" Net Revenues" means gross revenues received by STRATEGY from its Distribution partner and other third parties for Software and/or Merchandise actually sold to End-Users, less Distribution fees of twenty-two percent (22%), returns, Chargebacks, discounts, co-op, MDFs, rebates, customer allowances, Manufacturing Costs, taxes, duties, commissions, insurance, transportation costs, the DISNEY royalty as defined in Section 7.c., and reserves for Chargebacks and returns taken by third parties; provided, however, that the subsequent release of the reserve for Chargebacks and returns shall be considered as a part of Net Revenues upon such release of any remaining reserves.

j.

" Merchandise" means STRATEGY guides and telephone hint or gaming assistance relating to the Software.

k.

" Products" means, collectively, the Software and the Merchandise.

l.

" Release Candidate" means the final version of the program has been approved by the RED MILE, but not yet approved by STRATEGY, as suitable for duplication and shipping. It includes all changes, modifications, alterations, and additions agreed to by STRATEGY and RED MILE based upon review and testing of the Beta Milestone. If approved by STRATEGY, this build becomes the Gold Master. If not approved, the next build is also a Release Candidate with a number designator (Release Candidate 1, Release Candidate 2, etc.)


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m.

" Software" means the computer program(s) set forth in Exhibit " A" (attached hereto and incorporated herein) operating on the Windows 98, Windows 2000, and Windows XP operating systems and does not include any derivative works or other versions thereof, including, without limitation, any merchandising, television, film, music, sequels, add-ons, level packs.

n.

" Territory" means the entire World with the exception of the former CSIS countries, namely, Russia, Ukraine, Belarus, Estonia, Latvia, Lithuania, Moldova, Kazakhstan, Kirghizia, Georgia, Armenia, Azerbaijan, Turkmenia, Tajikistan and Uzbekistan, which former CSIS countries shall be retained by RED MILE.

2.

LICENSE GRANTS

a.

Distribution. RED MILE hereby grants to STRATEGY, and STRATEGY hereby accepts, an exclusive license to publish, manufacture (subject to 2f below), market, promote, publicize, distribute and sell the Products throughout the Territories for the Term through any and all means of standard retail and/or End User on-line distribution.

b.

OEM Bundling Transactions. STRATEGY may not do bundling or OEM deals.

c.

DEVELOPER Trademarks and Trade Names. RED MILE hereby grants to STRATEGY, and STRATEGY hereby accepts, an exclusive license in the Territory during the Term to use, publish and permit others to use and publish RED MILE' s name as associated with the software solely as well as any names of or trademarks associated with or embodied in the software or any reproduction or simulation thereof and, subject to any contractual restrictions of which RED MILE has advised STRATEGY from time to time, the script, speech, images, characters, characterizations, designs, graphics, artwork, and other characteristics associated with the Software, all of the above solely and exclusively in connection with the sale, advertising, distribution and exploitation of the Products. Further, subject to approval from DISNEY, STRATEGY shall have the similar rights to use the Disney and Aladdin trademarks.

d.

Packaging and Promotional Material. RED MILE hereby grants to STRATEGY, and STRATEGY hereby accepts, a non-exclusive license, for advertising, publicity and promotional purposes with respect to STRATEGY' s sale of the Products, to permit the reasonable use of all artwork, textual material and other materials used for or by RED MILE in connection with the Software, including advertising, packaging and wrapping materials (collectively, " Packaging and Promotional Materials" ) created by RED MILE in connection therewith. Nothing in the grant of licenses to STRATEGY shall limit RED MILE' s right to self-market their products.

e.

Sublicensing. STRATEGY shall have the exclusive (even as to RED MILE) license in the Territory to sublicense the rights set forth in this Agreement.

f.

Manufacturing. STRATEGY shall have each manufacturer, whether manufacturing directly for STRATEGY or for a sublicensee, to complete and send to RED MILE Exhibits " E" and " F" of this Agreement and comply with these exhibits.


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STRATEGY understands that non-compliance with this requirement would give Disney the right to immediately terminate its agreement with RED MILE and RED MILE would be required to immediately terminate this Agreement.

3.

TERM

This Agreement shall become effective on the date hereof and, unless sooner terminated pursuant to the terms of this Agreement, shall continue in full force and effect until December 31, 2007 (the " Term" ). The Agreement may be renewed by the mutual written agreement of both Parties hereto.

4.

RIGHT OF FIRST REFUSAL

Prior to executing any agreements with any other party RED MILE shall offer to STRATEGY for a period of thirty (30) days the right to publish (i) a sequel (the " Sequel" ) to any program, (ii) modifications of any program to include additional features or gameplay (" Add-Ons" ), and (iii) versions of the Program suitable for play on other platforms (including but not limited to, the PS-2, X-Box, Game Cube, etc.), upon terms satisfactory to RED MILE.

5.

RED MILE`S OBLIGATIONS

a.

Delivery. Upon a date mutually agreed upon by the parties, RED MILE shall deliver to STRATEGY two (2) complete Masters of each of the programs and, if the game has copy protection, CD checks, or other game verification systems, one (1) complete Master without these systems. The Masters for the programs will be the English language version then available. STRATEGY shall have final approval of the commercial acceptability of the Program(s).

b.

Demo Version . RED MILE shall use its best commercial efforts to deliver to STRATEGY thirty (30) days prior to STRATEGY' s first shipments of the Product(s) an interactive demonstration version of the Program(s) on a medium requested by STRATEGY for reproduction and use in the marketing and promotion of the Program(s) in the Territory. The demonstration version shall demonstrate all material functionality, interface design and audio and graphical direction of the Program(s).

c.

Game Design and Walk-Through. RED MILE shall use its best commercial efforts to deliver to STRATEGY a thorough walk-through of the game and the completed Game Design Documentation upon delivery of the Beta version of the software or within thirty (30) days of the signing of this agreement if the Beta version of the software has already been completed. These documents must have sufficient detail to give STRATEGY complete understanding of all of the concepts and components of game play so that STRATEGY will be in a position to render complete technical assistance to its customers and End Users.

d.

Localization. RED MILE shall provide whatever existing localized assets it has to STRATEGY as well as whatever existing instructions exist. RED MILE will use reasonable commercial efforts to assist STRATEGY in localizing the Product.

e.

Localization Kit. RED MILE shall provide STRATEGY with a localization kit thirty (30) days prior to completion of Gold Master or twenty (20) days after signing this Agreement if the Gold Master is already completed or its completion is anticipated less than thirty (30) days after the Agreement is signed.


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f.

Integration. RED MILE shall integrate all translations provided by STRATEGY within ten (10) days of receipt by RED MILE. STRATEGY shall have final approval of the commercial acceptability of the localized Program(s). RED MILE shall at its expense, recompile the translated and localized materials so that the Software is in the formats and languages as specified by STRATEGY and is otherwise suitable (for content or otherwise) for use in the countries designated by STRATEGY.

g.

Marketing/PR. RED MILE shall cooperate with STRATEGY in its efforts to promote and advertise the Product. RED MILE shall deliver screen shots, hi-res graphics, manual text and graphics, concept art and any other reasonable materials that would assist STRATEGY in the marketing and promotion of the Product.

i.

All marketing and public relations materials created by STRATEGY are subject to approval of RED MILE and DISNEY, which DISNEY may approve in its sole discretion. Any materials not specifically approved by DISNEY are deemed disapproved and use of such materials will be deemed a material breach of this Agreement.

ii.

STRATEGY shall provide DISNEY with 200 units of each version of the Product free of charge and will provide RED MILE with 20 copies free of charge.

h.

Quality Assurance. RED MILE will use its best commercial efforts to deliver a quality Master to STRATEGY. STRATEGY shall perform its own quality testing of the Software, and shall have sole discretion in determining the commercial acceptability of the Software.

i.

Gold Master. STRATEGY acknowledges that they are licensing a completed game that has been approved by DISNEY. The only change to the English language game shall be removal of the Sierra splash screen and insertion of a STRATEGY FIRST splash screen. This change will require review and approval by DISNEY.

j.

Server Costs and Matchmaking Services. The product has no online component.

k.

Copy Protection. The product as delivered to STRATEGY is not intended to be copy protected. If STRATEGY wishes to implement copy protection at its own cost, RED MILE shall use reasonable commercial efforts to assist.

l.

Developer Materials Document. RED MILE will provide to STRATEGY a full and completed DEVELOPER MATERIALS DOCUMENT (DMD) within fifteen (15) days of the date of this Agreement. If the DMD is not complete or deemed acceptable, STRATEGY shall return said document indicating where the document is incomplete. RED MILE shall have ten (10) days then to complete the document. The DMD is required in order for STRATEGY to begin producing, marketing, and promoting the software. The DMD shall be attached to this Agreement as Exhibit "


6.

STRATEGY' S OBLIGATIONS

a.

Distribution. STRATEGY shall use its best efforts to sell and distribute the Products subject to the terms of this Agreement. STRATEGY shall sell the Products at price(s) mutually determined by both STRATEGY and RED MILE prior to the scheduled release. STRATEGY may make decisions with respect to returns and


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price protection in conformance with prevailing industry standards and procedures. STRATEGY will use its reasonable commercial best efforts to publish each title two (2) months after it has accepted the Gold Master. STRATEGY will use it' s best efforts to get as wide a geographical distribution as possible prior to release.

b.

Warehousing. STRATEGY, or a third party on behalf of STRATEGY, shall provide warehousing for the Products, fulfill orders (i.e. provide " pick, pack and ship" services) and manage, process and restock returns of the Products, if any.

c.

Invoice and Collection. STRATEGY, or a third party on behalf of STRATEGY, shall invoice and collect from End-Users or distributors for the Products distributed pursuant to this Agreement.

d.

Marketing . RED MILE shall cooperate with STRATEGY in the development of the marketing plan for the sale and advertising of the Products (the " Marketing Plan" ). STRATEGY shall manage and implement co-op advertising programs and marketing as STRATEGY determines in its reasonable discretion. With respect to the Marketing Plan, STRATEGY shall spend no less than the minimum marketing sum and no more than the maximum marketing sum (the " Marketing Expenses" ) shown on Exhibit " A" in the marketing and advertising of the Products and pursuant to the dates set forth in the Marketing Plan; provided, however, that such Marketing Expenses may be increased or decreased by the parties by mutual agreement. No more than thirty-three percent (33%) of the Marketing Expenses may be STRATEGY' S internal marketing expenses; at least sixty-seven (67%) percent must be direct out-of-pocket expenses spent with third parties. As part of the Marketing Plan, STRATEGY shall, (i) design advertising and collateral materials to attract customers for the Software, and (ii) provide suitable press releases and public relations efforts for the initial release of the Software. The parties acknowledge that all materials created under this Section require the approval of DISNEY.

e.

End-User Support. STRATEGY shall, provide End-Users of the Products in the Territory with reasonable technical support via the telephone and E-Mail and such costs shall be solely borne by STRATEGY. RED MILE shall provide STRATEGY with such information and training required for STRATEGY to perform such End User support. Reasonable travel and lodging costs incurred by RED MILE to provide such training shall be borne solely by STRATEGY.


7.

ROYALTIES

a.

Advance Royalties. Within ten days of both Parties signing this Agreement, Strategy shall pay to Red Mile a non-refundable, recoupable, advance royalty in the amount of xxxxxx . An invoice shall be submitted to STRATEGY by RED MILE, and this advance royalty shall be wire-transferred to RED MILE by STRATEGY in accordance with RED MILE' s wire instructions. This advance royalty is recoupable by STRATEGY who shall hold back actual royalties earned and payable as the result of actual sales until the advance royalty is fully recouped.

b.

Payment of Royalties. For and in and consideration of the licenses and other rights granted hereunder, STRATEGY shall pay to RED MILE as royalties, for any sales by STRATEGY, 50% of the Net Revenue, plus the DISNEY royalty as defined


6


below. In no case shall the payment to RED MILE for each unit sold be less than the DISNEY royalty.

c.

Minimum Royalty Per Unit Sold. Notwithstanding the equal sharing of Net Revenue as defined in this Agreement, Strategy acknowledges that the minimum royalty payable to DISNEY per unit sold shall be xxxxxx for all countries except Europe and xxxxxx Euro for Europe.

d.

Royalty Payments and Statements. Royalties shall be computed based on the currency of the United States of America, and shall be paid in the currency of the United States of America. For purposes of the preceding sentence, the exchange rate used to convert any Net Receipts into American currency shall be the exchange rate actually charged to STRATEGY by the party converting such Net Receipts into American currency. Royalties shall be calculated at or near the end of every quarter based upon the distribution and sales reports that STRATEGY receives from its distribution partners. A written statement providing a complete, itemized description of the calculation of the Royalties paid for the preceding quarter (a " Royalty Statement" ) shall accompany each Royalty payment, or shall be sent alone within such period if no Royalties are due for such quarter. Statements as to royalties payable hereunder shall be sent by STRATEGY to RED MILE, together with payment of any royalties earned by RED MILE.

e.

Payment Schedule. STRATEGY shall pay the Royalties to RED MILE quarterly as follows: (a) each quarter ending in March, Royalties shall be paid on or before May 20th after such quarter, (b) each quarter ending in June, Royalties shall be paid on or before August 20th after such quarter, (c) each quarter ending in September, Royalties shall be paid on or before November 20th after such quarter, and (d) each quarter ending in December, Royalties shall be paid on or before February 20th after such quarter.

f.

Return Credit. In connection with each quarterly accounting period, STRATEGY shall have the right to retain, as a reserve against charges, credits, or returns, such portion of payable royalties as shall be reasonable in STRATEGY' s best business judgment, but not to exceed fifteen percent (15%) of such payable royalties. Each reserve so established shall be liquidated and paid, to the extent it is not reduced for actual or potential returns and credits, on the first anniversary of the date such reserve was first taken.

g.

Final and Binding Effect. RED MILE shall be deemed to have consented to all Royalty Statements and all other accountings rendered by STRATEGY hereunder, and each such Royalty Statement or other accounting shall be conclusive, final and binding, shall constitute an account stated and shall not be subject to any questions for any reason whatsoever, unless specific objection in writing, setting forth the basis thereof, is given by RED MILE to STRATEGY within two (2) years after RED MILE' s actual examination of the Royalty Statements, if any, pursuant to this Agreement. No action, suit, or proceeding of any nature with respect to any Royalty Statement or other accounting rendered by STRATEGY hereunder may be maintained against STRATEGY unless such action, suit or proceeding is commenced against STRATEGY in a court of competent jurisdiction within two (2)


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years after RED MILE' s actual examination of the Royalty Statements, if any, pursuant to this Agreement.

h.

Examination of Royalty Statements. STRATEGY shall maintain, at its executive offices, which are presently in Montreal, Canada, books of account concerning sales of the Products hereunder. RED MILE may examine or, at RED MILE' s sole expense, appoint an independent certified accountant to examine STRATEGY' s said books relating to the sale of the Products hereunder no more than once each calendar year, solely for the purpose of verifying the accuracy thereof, only during STRATEGY' s normal business hours and upon ten (10) days' prior written notice. RED MILE shall notify STRATEGY in writing within ninety (90) days after it or its independent certified accountant has completed such examination if RED MILE believes that STRATEGY' s books are not accurate, and supply STRATEGY with a report including a description of any and all alleged inaccuracies contained therein. RED MILE, STRATEGY and their respective representatives shall keep all information obtained in such examination confidential and to use such information solely for the purpose of this Section. If any additional monies are shown to be payable by STRATEGY to RED MILE based upon an examination and such amount shown due exceeds ten percent (10%) of the Royalties previously paid by STRATEGY in relation to the particular Statement(s) which may be the subject of the examination, STRATEGY shall reimburse the reasonable costs of such examination and fees and expenses related thereto, as and when paid by RED MILE, plus interest at the lesser of twelve percent (12%), or the maximum lawful rate on such unpaid amount to be computed from the first date such monies were to have been accounted for.

i.

Payment Pursuant to Examination Rights . With respect to any claim by RED MILE that additiona
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