EXHIBIT 10.18
ENDORSEMENT AND SERVICES AGREEMENT
This Agreement is made this 15th day of October, 2004 by and between Kentucky
Eleven, Inc. ("KE") for the services of Xxxx Xxxxx ("Xxxxx") and Teknik Digital
Arts, Inc. ("TDA").
WHEREAS, TDA desires that KE, and KE agrees, to cause Xxxxx to perform certain
services for TDA and to grant certain rights to TDA in connection with the
promotion, marketing and advertising of certain of TDA's "Products", as defined
herein, on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual promises contained herein, it is
agreed as follows:
1. "Products", as used herein, shall mean: (i) that certain interactivity
licensed device presently known as the Pep Pad, by whatever name hereafter known
("Pep Pad") and (ii) specifically all physically interactive training
performance software developed for use with the PepPad, in any and all licensed
platforms and applications, which now or which may hereafter during the Term
hereof (as hereinafter defined) utilize the "Pep Pad for physically interactive
training purposes".
2. (a) TDA shall have the right to use Xxxxx'x name, photograph and likeness
in connection with printed materials promoting, marketing and/or advertising the
Products, including but not limited to, consumer print advertising, sales
brochures and Product labeling and packaging. Xxxxx shall have the right to
approve the foregoing, including but not limited to all proposed advertising
copy, sales brochures and all proposed Product labeling and packaging. Xxxxx
shall have fourteen (14) days from receipt of marketing materials to disapprove
in writing to JV and explain specifically why materials are not approved. If
notice is not received within that time frame, then said materials shall be
deemed approved.
(b) Xxxxx shall be available to perform for the recording of radio and
television commercials and/or "infomercials" for the Products. TDA agrees that
Xxxxx shall have the right to approve the proposed and final script and format
of any of the foregoing and all proposed final edited versions thereof prior to
initial broadcast. Xxxxx shall have fourteen (14) days from reviewing proposed
and final scripts, infomercials and commercials to disapprove in writing to JV.
If notice is not received within that time frame, then said materials shall be
deemed approved. No more than one (1) infomercial per year shall be produced
during each "Contract Period" of the "Term" hereof (as those terms are defined
in Paragraph 3(a) below).
(c) In connection with the performance of his duties pursuant to
Paragraphs 2(a) and 2(b) above, Xxxxx shall be available to TDA during each year
of the "Contract Period" of the "Term" hereof for a total of up to two (2)
Personal Services Days, one (1) of which shall be devoted to: (x) a photo
session for materials subject to Paragraph 2(a) and/or the production of any
radio commercials produced pursuant to Paragraph 2(b), and the other of which
shall be devoted to: (y) the production of television commercials and/or an
infomercial subject to Paragraph 2(b). Xxxxx'x maximum time commitment for any
Personal Services Day shall be four (4) hours with respect to a photo session
and/or radio production session and eight (8) hours with respect to a television
and/or infomercial production session. Hours available for a Personal Services
Day may not be used over the course of more than one (1) calendar day and are
not transferable between each other.
(d) In addition to the foregoing, Xxxxx shall be available during each
year of the "Contract Period" of the "Term" hereof to make up to three (3)
personal appearances on TDA's behalf, the location, format and nature of Xxxxx'x
duties in connection therewith to be mutually agreed upon. Xxxxx' maximum time
obligation in connection with each personal appearance shall be two (2) hours.
(e) All services to be performed hereunder shall be performed at mutually
agreeable times and locations and shall be subject to at least fifteen (15) days
prior written notice and to any prior conflicting engagements or obligations
Xxxxx may have. In connection with all services, TDA shall provide Xxxxx and one
(1) companion or business representative with roundtrip airfare and limousine
ground transportation and (if required) room and lodging, all of which shall be
on a "first class" basis.
(f) Personal Services Days and personal appearance days are not cumulative
and may not be transferred between Contract Periods.
3. (a) The term of this Agreement (the "Term") and of TDA's rights hereunder
shall be for a three (3) year period commencing on the date hereof and expiring
on October 14, 2007, unless sooner terminated or renewed in accordance with
applicable provisions elsewhere set forth herein. "Contract Period", as used
herein, shall mean each consecutive twelve (12) month period of the Term, the
first of which shall commence as of October 15, 2004.
(b) The territory to which this agreement applies is the world (the
"Territory".)
4. TDA shall pay KE the following compensation in respect of the rights
granted and services agreed to be performed by Xxxxx hereunder:
(a) Royalty: TDA will pay KE a royalty of five (5%) percent of TDA's
"Adjusted Gross Receipts" from the sale in any and channels of distribution, or
any other exploitation, of the Products during the "Royalty Period" (as
hereafter defined) throughout the Territory. "Adjusted Gross Receipts" shall
mean TDA's gross receipts from such sale or other exploitation of the Products,
less only, on a Product by Product basis, actual documented out of pocket third
party distribution costs or charges. "Royalty Period" shall mean the three (3)
year period commencing as of the date of the first commercial shipment of any of
the Products, notwithstanding that said Royalty Period shall end following
expiration of the Term. TDA shall, on or before 45 days following each September
30th, December 31st, March 31st and June 30th during the Royalty Period, render
detailed reports to KE setting forth the quantities of Products sold by TDA and
the Adjusted Gross Receipts derived therefrom during the preceding period. At
the time of rendering such reports, TDA will pay to KE all royalties shown to be
due. KE shall have the right to audit TDA's books and records upon reasonable
notice to verify the accuracy of TDA's accountings. In the event of a
discrepancy in KE's favor of 5% or more, TDA shall reimburse KE for its audit
fees and expenses.
(b) TDA confirms KE's royalty is payable by TDA regardless of whether TDA
elects to actually use any or all of the rights granted herein or call upon any
or all of the services Xxxxx has agreed to perform hereunder, so long as Xxxxx
is ready, willing and able to perform.
(c) All monies payable to KE shall be paid to "16W Marketing, LLC, as
agent for Kentucky Eleven, Inc. f/s/o Xxxx Xxxxx" and shall be sent to KE c/o
16W Marketing, LLC, 00 Xxxxx Xxxxxx, Xxxxxxxxxx, XX 00000 or such other address
as KE may designate in writing.
5. For a period of 120 days following the expiration of the Royalty Period
hereof TDA shall have the right to sell-off TDA's then remaining inventory of
royalty bearing Products bearing Xxxxx'x name or likeness, subject to TDA's
obligation to pay the applicable royalty to KE hereunder within 30 days after
expiration of each sixty (60) day period of the sell-off period.
6. (a) Xxxxx shall not endorse within the Territory during the Term hereof
any other interactive fitness video games. Xxxxx shall not otherwise be
restricted hereby in connection with the exploitation of his name, photograph,
likeness, autograph, or services. TDA agrees that the rights granted to TDA
hereunder may be utilized solely in connection with the advertising and
promotion of the Products and may not, without Xxxxx'x prior written consent, be
used in conjunction with the advertising or promotion of any other products,
services or goods (that is, there shall be no cross-promotions, tie-ins or other
types of uses associated with other products or services without such consent).
TDA further agrees that Xxxxx shall have the right to approve in advance all
press releases, biographies and other written or visual material issued to
promote the subject matter hereof.
(b) No premium or promotional items utilizing any of the rights granted to
TDA hereunder may be produced without KE's consent.
7. TDA understands and agrees that KE and Xxxxx shall not be deemed to be
granting TDA any rights owned or controlled by any third parties, including but
not limited to the CBS, the NFL or the New York Giants, any required clearance
of which shall be TDA's sole responsibility at TDA's sole expense.
8. (a) TDA hereby indemnifies and holds harmless, KE, Xxxxx, his and its
agents and assigns from and against any and all liability, expense and cost
(including reasonable attorneys' fees) arising out of any claim based on the
use, quality, or safety of the Products or based on any act or omission by TDA
or any of TDA's agents, officers, or employees or any third parties in
connection with the production or creation of advertising or promotional
materials hereunder, or based on any act or omission by Xxxxx in connection with
the performance by Xxxxx of any of his obligations hereunder.
(b) TDA shall provide, at its sole cost, Commercial General Liability
insurance covering any claims, liabilities or losses described in the foregoing
indemnity. Such insurance shall be in an amount not less than one Million
($1,000,000) Dollars aggregate per occurrence and One Million ($1,000,000),
placed with C.N.A. KE, Xxxxx and all other indemnitees referred to in Paragraph
8(a) shall be listed as additional insureds in connection with the foregoing
insurance policies and TDA will provide KE with documentation of compliance with
the foregoing.
9. TDA may not claim KE or Xxxxx to be in breach hereof unless TDA has given
KE written notice of any alleged breach and same has not been substantially
cured within twenty (20) days following receipt of such notice.
10. This Agreement represents the sole and final agreement between the parties
hereto and may not be modified except by written instrument signed by both
parties. This agreement shall be construed in accordance with the laws of the
State of Arizona applicable to agreements wholly performed therein. In the event
of any litigation or other legal proceeding brought against one party by the
other based on or arising under this Agreement, the prevailing party shall be
entitled to recover legal fees in addition to any other sums awarded.
11. Special Provisions:
A. TDA shall issue Xxxxx/KE, Twenty Thousand (20,000) shares of Rule 144
restricted common stock in TDA.
B. Notwithstanding anything to the contrary contained herein, KE shall
have the option, exercisable at any time before expiration of the second twelve
(12) month period of the Royalty Period, to elect to receive, in lieu of any
future royalty entitlement under Paragraph 4(a) on Product sales first occurring
after the date of any such election, and TDA agrees to issue, two hundred
thousand (200,000) shares of Rule 144 restricted common stock in TDA, which
shall be in addition to those shares issued per Subparagraph C above.
1. Any election by KE shall not effect KE's right to thereafter
receive any accrued royalties on Adjusted Gross Receipts earned or
credited to TDA prior to the date of election.
C. In the event of any stock split, reorganization, merger,
recapitalization or other similar event, TDA shall make such adjustment in the
number of TDA shares subject to 11 A. and 11 B. above as is required to maintain
value.
IN WITNESS WHEREOF, the parties hereunto have set their hands all as of the date
and year first above written.
TEKNIK DIGITAL ARTS, INC. KENTUCKY ELEVEN, INC.
BY: /s/ Xxxx Xxxx By: /s/ Xxxx Xxxxx
-------------------------- --------------------------------
