Kaleidoscope Media Group, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Vendor Agreement
This Vendor Agreement ("Agreement") is executed this December 18, 1996
between the Kaleidoscope Media Group, Inc., a Delaware Corporation with
principal offices located at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, XX ("KMG"), and
HSN Direct Int. LTD ("HSN Direct") a company in England, having an office at
00000 00xx Xxxxx Xxxxx, Xx. Xxxxxxxxxx, Xxxxxxx 00000.
Agreement
1. Purpose
1.1. KMG is developing the Celebrity Showcase for advertiser-supported
transaction entertainment programming. HSN Direct is in the business of
providing various services in connection with the sale of products through
infomercials and transactional programming. KMG shall develop, produce and
broadcast a pilot program and, if warranted, a subsequent U.S. syndicated,
daily, sales/entertainment interactive program with thc working title Celebrity
Showcase ("CS").
1.2 It is the intent of the parties to enter into a Vendor Agreement such that
HSN Direct will provide certain services described herein, and that the pilot
and possible daily program be reformatted to be suitable for international
exploitation by HSN Direct as infomercials.
1.3 HSN Direct shall pay an "origination fee" to KMG, equal to seventy five
thousand dollars ($75,000). Payment by HSN Direct is to be made upon execution
of this Agreement but no later than December 24, 1996. By virtue of paying the
said origination fee, HSN Direct shall be entitled to earn an "origination
rebate" from KMG, (as defined herein) as relates to the pilot program. HSN shall
also be entitled to execute an option to participate in the subsequent daily
series, such option to be at the sole discretion of HSN Direct, to be
communicated in writing to KMG within sixty days (60) following broadcast of the
pilot.
1.4 Notwithstanding any other terms and conditions contained within this
Agreement, HSN Direct's right to exercise the option to continue with the series
is conditional upon written authorization from HSN Direct's Board of Directors
and written authorization of the Board of the Home Shopping Network, such
authorization as stipulated in Schedule II attached to this Agreement.
2. Definitions
2.1. As used in this Agreement, "infomercials" are defined as transactional
television programming, specifically created to introduce, promote and sell
consumer products directly, via telephone ordering. Such programming is usually
half hour in length, although shorter (e.g. 30 second, 1 minute and 2 minute
direct response shortform) programs are also utilized.
2.2. As used in this Agreement, "production costs" are defined as all costs
associated with the creation and development and delivery finished programs,
infomercials and the like, on tape, ready
for broadcast. Such costs include, but are not limited to, direct costs for
research, writing, studio costs, location costs, legal fees, wardrobe, technical
personnel, directors, producers, materials, per diems, celebrity fees, etc. and
overhead allocations for administration, systems, and management.
2.3. As used in this Agreement, "net profits" are defined as the net earnings of
the program calculated as: the total of all revenues, actually received from
all sources, earned by CS, less all costs associated with CS, including, but not
limited to, distribution, promotion, production, and direct project overhead.
2.4 As used in this Agreement, "origination rebate" is defined as an amount to
be paid to HSN Direct, calculated as a percentage of the net profits as defined
in Section 2.3 above. Said percentage shall be proportional to the percentage
paid by HSN Direct into the development and production budget. Such rebates are
to be paid thirty days (30) after the close of each fiscal quarter.
2.5 As used in this Agreement, "net proceeds" are defined as gross revenues on
product sales, less the cost of the product, less the HSN Direct xxxx-up as
defined in Section 6.1.1 herein, less any fees or royalties payable to third
parties.
3. KMG Projects ("Programs") covered under this Agreement:
a) Celebrity Showcase - Pilot
b) Celebrity Showcase - Daily Program
4. Term
4.1. The term of this Agreement shall commence upon execution and shall
terminate thirty days subsequent to broadcast of the pilot, unless the option to
continue with the daily series is exercised by HSN Direct, as per Section 1.3
herein. Upon exercise of the said option, the Agreement shall continue until
dissolved by mutual Agreement of the Parties or as otherwise provided for in
this Agreement.
5. Place of Business
5.1. The principal place of business KMG for the projects covered under this
Agreement is 0000 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX.
6. Nature of Vendor Services
6.1. HSN Direct shall provide the following services in connection with the
Programs as required by KMG at cost plus a reasonable markup, with the mutual
understanding that direct costs associated with providing these services shall
be compensated by the fee provided for in Section 8.1 herein.
I. Source and obtain products;
II. Warehouse the products;
III. Fulfill orders.
6.1.1 It is the intent of the Parties to minimize financial risk regarding
purchasing of product into inventory and are agreed that initially, product
shall be acquired on the following basis: (1) Best of HSN, (2) on consignment,
(3) readily available within 30 days, (4) 3rd party financing, (5)
liquidation. It is agreed by the Parties that HSN Direct shall be the exclusive
supplier of product, unless mutually agreed otherwise. Product provided by HSN
Direct shall be at true cost plus a reasonable markup.
6.2. In territories where HSN Direct shall obtain foreign distribution for the
CS broadcasts through international licensing, HSN Direct shall retain fifty
percent (50%) the net proceeds, as defined in Section 2.5 herein, of all such
international revenues received, prior to remitting the balance to KMG.
6.2.1 HSN Direct shall have the exclusive right to create or cause to be created
an infomercial, for either international or domestic use, of any length
utilizing some or all of the footage in CS with respect to products introduced
and developed by HSN Direct. For products introduced and developed for CS by any
entity other than HSN Direct, CS shall make a best effort to offer the right of
first refusal to HSN Direct to obtain the rights to the infomercial, provided
such rights are available to CS. HSN Direct shall retain fifty percent (50%) of
the net proceeds as defined in Section 2.5 herein, and remit the other fifty
percent of the net proceeds to KMG.
6.3 In territories where KMG shall obtain foreign distribution for the CS
broadcasts through international licensing, or obtain sales of CS product
through other means, KMG shall retain twenty-five percent (25%) the net
proceeds, as defined in Section 2.5 herein, of all such international revenues
received, that shall not be included when calculating the net profit of CS.
6.4. HSN Direct shall provide information related to fulfillment, product
sourcing, and other transactions related to CS activity, as may be necessary and
mutually agreed to allow accurate accounting by KMG.
6.5. KMG shall develop program concepts, obtain the services of entertainment or
sports personalities to promote the Products, shall obtain agreements with
television stations for domestic U.S. broadcast (syndication) and be responsible
for delivering Programs ready for broadcast. On any and all domestic
distribution revenues KMG shall retain a thirty-five percent (35%) distribution
fee that shall not be included when calculating the net profit of CS.
6.6. KMG shall provide personnel to manage Program development, and shall be
responsible for budget development and subsequent accounting and reporting of
actual results.
6.7. All properties created under this Agreement (such as, but not limited to,
programs and infomercials) and all rights to exploit such properties, shall
from the inception of the project, exclusively and perpetually, throughout the
universe, be owned by KMG.
6.8. Authorization to include any additional projects under the terms of this
Agreement is to be mutually agreed in writing by KMG and HSN Direct, subsequent
to concept development and creation of a project budget, and prior to costs
being incurred.
6.9. Any and all disputes and claims arising out of this Agreement shall be
settled and determined by arbitration as stipulated in Section 15.2. herein.
6.10. This Agreement shall be deemed non-exclusive to either party, with the
exception of syndicated transactional programming, such as the CS program
undertaken by the Parties through this Agreement and described herein.
7. CS Program
7.1 The initial project shall be the production of a CS pilot; one hour program,
intended for broadcast in January of 1997. The budget of the pilot is not to
exceed $150,000 for production and distribution costs; any increase above this
limit that may be necessary, shall be mutually agreed by both parties in writing
in advance of any such additional expenditure. The pilot is to be produced and
broadcast from Los Angeles, California, and it is the intent of the parties to
broadcast said pilot program internationally.
7.2 Subsequent to the broadcast of the pilot, management of KMG and HSN Direct
shall meet to evaluate the results of the pilot, and if mutually agreed, KMG
shall proceed with the development of daily show, to be broadcast commencing as
early as July 1997, but no later than September 1997.
7.3 Should HSN Direct, at their sole discretion, decide not to exercise the
option to continue with the daily series, KMG shall have the sole discretion
whether to continue the program without the participation of HSN Direct.
7.4 Description of the CS format and program is attached as Exhibit I.
8. Guaranteed Fee
8.1. Notwithstanding other payment provisions herein, and conditional upon HSN
Direct's exercise of the option to continue with the daily series per Section
1.3 and Section 1.4 herein, HSN Direct shall receive a guaranteed fee of ten
thousand dollars ($10,000.00) per month during CSL's first two fiscal years, or
a shorter period of time should CS be dissolved earlier than the said two fiscal
years. Such amount shall be considered an advance of the origination rebate
specified in Section 2.4 and shall commence no later than February, 1997. No
payments beyond the said minimum guarantee shall be paid to HSN Direct until any
and all CS losses, and/or net profit shortfalls are recovered by KMG sufficient
to achieve a percentage of actual net profits equivalent to the relationship
specified in Section 2.4. Further, no payments beyond the said minimum guarantee
shall be paid to HSN Direct until KMG receives payments from net profits equal
to those received by HSN Direct.
8.2 Notwithstanding the provisions of Section 8.1 above, the Parties recognize
that consumer response to CS may be much greater than is initially anticipated,
and that the increased volume of orders of product sold through CS could
necessitate additional personnel being hired by HSN Direct. The Parties intend
that under such circumstances as described within this section, the guaranteed
fee as specified in Section 8.1 may be increased by mutual agreement of the
Parties.
8.3 KMG acknowledges that no partnership or joint venture of any kind is
intended to be created by this Agreement, and that neither party nor any of its
officers, employees, agents or representatives is an employee or agent of any
other party for any purpose whatsoever. Rather, each party is and shall at all
times remain an independent contractor. Neither party has, nor shall it hold
itself out at as having, any right, power or authority to create any contract
obligation, either express or implied, on behalf of, in the name of, or binding
upon the other party, unless such other party shall consent thereto in writing.
Each party shall have the right to appoint and shall be solely responsible for
its own employees, agents and representatives, who shall be at such party's own
risk, expense and supervision and shall not have any claim against any other
party for compensation or reimbursement.
9. Accounting
9.1. HSN Direct shall provide information related to product fulfillment,
product pricing and sourcing, foreign distribution agreements and any other
transactions related to HSN Direct activity on behalf of CS, as may be necessary
and mutually agreed to provide accurate and timely accounting for CS.
9.2 At all times during the continuance of CS, KMG and HSN Direct shall keep
accurate books of account in which all matters relating to the Programs,
including all income, expenditures, assets and liabilities. KMG and HSN Direct
shall each have the right to inspect relevant accounting records pertaining to
transactions related to CS.
9.3. A complete accounting by KMG of CS as of the close of business on the last
day of each calendar month of each year shall be available within twenty (20)
days after the close of the month. On each accounting being made, status of the
net profits and losses of CS shall be provided. Except as to manifest errors
brought to the attention of KMG within thirty (30) days after its rendition,
each such accounting shall be final and conclusive.
10. Fiscal Year
10.1. The fiscal year of KMG ends on the 31st day of December of each year.
11. Termination of Agreement
11.1. Either party may terminate this Agreement upon 30 days notice to the other
party upon the breach by the other party of any of its material representations,
warranties, covenants or obligations under this Agreement. Upon the expiration
of such notice period, this Agreement shall terminate without the need for
further action by either party, provided, however, that if the breach upon which
such notice of termination is based shall have been fully cured to the
reasonable satisfaction of the non-breaching party within such 30-day notice
period, then such notice of termination shall be deemed rescinded. Such right of
termination shall be in addition to such other rights and remedies as the
terminating party may have under applicable law.
12. Force Majeure.
12.1. Neither party will be deemed in default of this Agreement to the extent
that performance of its obligations, or attempts to cure any breach, are delayed
or prevented by reason of circumstance beyond its reasonable control, including
without limitation fire, natural disaster, earthquake, accident or other acts of
God ("Force Majeure"), provided that the party seeking to delay its performance
gives the other written notice of any such Force Majeure within 15 days after
the discovery of the Force Majeure, and further provided that such party uses
its good faith efforts to cure the Force Majeure. If there is a Force Majeure,
the time for performance or cure will be extended for a period equal to the
duration of the Force Majeure. This Article shall not be applicable to any
payment obligations of either party.
13. Proprietary Information.
13.1 The customers, business, products, technology, business connections,
customer lists, procedures, operations, techniques and other aspects of the
business of either Party are established at great expense and protected as
confidential information and trade Secrets and provide the Parties with a
substantial competitive advantage. Both Parties shall have access to, and be
entrusted with,
trade secrets, confidential information and proprietary information, and either
would suffer great loss and injury if the other Party would disclose this
information or use it to for competitive advantage. Consequently, the Parties
agree that during their relationship and for one year thereafter, they will not
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, or in any other capacity, use or disclose, or cause to be used or
disclosed, any trade secret, confidential information or proprietary information
acquired during the relationship.
14. Indemnification.
14.1 HSN Direct agrees to defend, indemnify, and hold KMG harmless from any and
all reasonable liabilities, losses, costs, damages, penalties and any other
expenses including attorneys fees arising directly or indirectly, either from
HSN Direct's acts or omissions or HSN Direct's breach of any obligation imposed
or sought to be imposed by or according to this Agreement. KMG shall not be
liable to HSN Direct, or to anyone who may claim any right due to a relationship
with HSN Direct, for any acts or omissions by HSN Direct in the performance of
this Agreement or on the part of the employees or agents of HSN Direct.
14.2 KMG agrees to defend, indemnify, and hold HSN Direct harmless from any and
all liabilities, losses, costs, damages, penalties and any other expenses
including attorneys fees arising directly or indirectly, either from KMG's acts
or omissions or KMG's breach of any obligation imposed or sought to be imposed
by or according to this Agreement. HSN Direct shall not be liable to KMG or to
anyone who may claim any right due to a relationship with KMG for any acts or
omissions by KMG in the performance of this Agreement or on the part of the
employees or agents of KMG.
15. Resolution of Disputes:
15.1 Each party acknowledges and agrees that, if there is any breach of this
Agreement, including, without limitation, unauthorized use or disclosure of
Proprietary Information or other information of the other party, the
non-breaching party will suffer irreparable injury that cannot be compensated by
money damages and therefore will not have an adequate remedy at law.
Accordingly, if either party institutes an action or proceeding to enforce the
provisions of this Agreement, such party will be entitled to obtain such
injunctive relief, specific performance, or other equitable remedy from a court
of competent jurisdiction as may be necessary or appropriate to prevent or
curtail any such breach, threatened or actual. These will be in addition to and
without prejudice to such other rights as such party may have in law or in
equity.
15.2 Any dispute, controversy, or claim arising out of or related to this
Agreement, or the creation, validity, interpretation, breach, or termination of
this Agreement will be referred to mediation before, and as a condition
precedent to, the initiation of any adjudicative action or proceeding, including
arbitration. The mediation will be held in New York City, NY. Either party may
demand mediation in writing, serving on the other party a statement of the
dispute, controversy, or claim, and the facts relating to it, in reasonable
detail. Furthermore, if within thirty (30) days after such demand, the parties
have not agreed upon a mediator and commenced mediation, the matter will be
referred to arbitration under Section 12.
16. Notice
16.1. Any and all notices between the parties provided for or permitted under
this Agreement by law shall be in writing and shall be deemed duly served when
personally delivered to either party, or, in lieu of such personal service, when
deposited in the United States Mail, certified, postage
prepaid, addressed to either party at the address of the principal place of
business and signed copy of that notice shall be filed and kept with the books
of CS.
17. Entire Agreement
17.1. This document is the entire and only Agreement of the KMG and HSN Direct
relating to CS and correctly defines the rights, duties and obligations of each
to the other in connection with CS as of its Commencement date. Any prior
Agreements, promises, negotiations, or representations not expressly defined in
this Agreement are of no force or effect. Any modifications, additions, or
alterations of this Agreement must be in writing and signed by both KMG and HSN
Direct.
For HSN Direct: /s/ [ILLEGIBLE]
----------------------------
Date: 4/7/97
For KMG: /s/ [ILLEGIBLE]
-----------------------------------
Date:
Kaleidoscope Media Group, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Addendum to 12/18/96 Vendor Agreement - Revised March 31,1997
This Addendum to the Vendor Agreement ("Agreement") dated December 18, 1996
and revised March 31, 1997, between the Kaleidoscope Media Group. Inc, a
Delaware Corporation with principal offices located at 000 Xxxx Xxxxxx Xxxxx,
Xxx Xxxx, XX ("KMG"), and HSN Direct Int. LTD.("KSN Direct") a company in
England, having an office at 00000 00xx Xxxxx Xxxxx, Xx. Xxxxxxxxxx, Xxxxxxx
00000. is executed by KMG and HSN Direct, this day of March 31, 1997.
Notwithstanding any existing terms and conditions of the said Agreement of
December 18th 1996, KMG and HSN Direct agree to the following, and the said
Agreement is amended accordingly;
1. The guaranteed monthly fee paid to HSN Direct, per section 8.1 of the
Agreement shall be fifteen thousand dollars ($15,000.00) per month, paid by KMG
beginning March 1997, during CSL's first two fiscal years, or a shorter period
of time should CS be dissolved earlier than the said two fiscal years. HSN
Direct shall have no obligation to proceed beyond August 1997 but subject to 4
below shall have the option to continue longer. Profit shares/origination fees
in 5.6 and 7 below shall relate to the HSN Direct period of participation.
2. The program originally referred to in the Agreement as Celebrity Showcase
Live, shall be entitled Celebrity Showcase ("CS"), and shall not be broadcast
live, but shall be broadcast daily from tape.
3. KMG has created an entity, Celebrity Showcase LLC ("CS LLC") to produce the
program and enter into distribution, talent and advertising agreements
associated with CS.
4. HSN Direct's responsibility shall be for advising on product selection and
HSN Direct shall not be responsible for funding product or inventory or for
payment for product, warehousing, fulfillment or any other liabilities of CS LLC
or KMG. As such, HSN Direct shall not be responsible as a partner in the venture
and KMG shall not hold HSN Direct out as being so responsible.
5. The commitment between the Parties for the CS broadcast shall be for thirteen
(13) weeks, however, upon analysis of the actual result of the first two weeks
broadcasts, a decision may be made by the Parties, by mutual agreement, to halt
production of the program after four (4) weeks. All carriage agreements with
distributors and stations shall include a provision to allow the cancellation of
programming and station/operator guarantees, with four weeks (4) notice.
6. If a third party enters into an agreement with KMG, so that under said
agreement the third party provides funding for CS development, production and
marketing, the third party shall retain one hundred percent (100%) of all CS net
profits, until such time as all investment financing is fully recouped.
Subsequent to recoupment, the third party shall retain fifty percent of all CS
net
profits and KMG shall retain twenty five percent (25%) of the net profit. HSN
Direct shall be provided an origination fee equal to the remaining twenty-five
percent (25%) of the net profit.
7. In the absence of any third party financing and KMG shall fund the
development, production and marketing of CS, then KMG shall retain one hundred
percent (100%) of all CS net profits, until such time as such funding is fully
recouped. Subsequent to recoupment, KMG shall retain seventy five percent (75%)
of the net profits and the origination fee paid to HSN Direct shall be
twenty-five percent (25%).
8. If HSN Direct and KMG jointly fund development, production and marketing of
CS, then one hundred percent (100%) of all CS net profits, shall be retained by
the Parties in proportion to their respective funding investments until such
time as all such financing is fully recouped. Subsequent to recoupment, the HSN
Direct and KMG shall equally share (fifty percent/fifty percent) of all CS net
profits. Any such funding by HSN Direct shall be at its sole option and subject
to its express agreement in writing.
For KMG: For HSN Direct Ltd.
/s/ Xxxxx Xxxxxx /s/ Xxxxx Xxxxxxxxxx 4/7/97
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Xxxxx Xxxxxx Date Xxxxx Xxxxxxxxxx Date
