DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement") is entered into this 6th day of
May, 1997 by and between KTEH, San Xxxx Public Television, a California
Public Benefit corporation with principal offices at 0000 Xxxxxxxxxxxxxx
Xxxx, Xxx Xxxx, Xxxxxxxxxx, 00000 ("KTEH") on the one hand, and American
champion Media, Inc., a Delaware corporation, with principal offices at 00000
Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxxxx, Xxxxxxxxxx 00000, ("ACM") on the other
hand.
RECITALS
KTEH and ACM (collectively the "Parties") have negotiated a transaction
whereby ACM will produce and KTEH will distribute a television series called
"Adventures With Xxxxx Xxxxx" (the "Program"). The Program is defined as a
series of 13 shows, each intended for a half-hour broadcast, of the materials
contained in the original masters to be produced by ACM and delivered to
KTEH. The parties have separately negotiated an agreement wherein KTEH will
provide technical facilities for the production of the series.
PRINCIPAL TERMS
1. Grant. ACM hereby grants to KTEH the sole and exclusive right under
copyright and otherwise, for the full Term and Territory, to exhibit,
distribute, advertise, market and otherwise exploit the Program on Public
Broadcast Service ("PBS") affiliated stations for unlimited plays.
2. Territory. The Territory of the grant herein includes the United States,
its territories and possessions, limited to PBS affiliated stations.
3. Term. The Term of this grant shall commence as of the date of execution
hereof and continue until two (2) years from the initial broadcast of the
Program by KTEH in the Territory. Notwithstanding the foregoing, the
promotion and marketing campaign will commence in the first quarter of 1998.
4. Royalty. All monies actually received by KTEH from the exploitation of the
rights granted to it hereunder (net of third party distribution fees and
costs) shall be allocated and paid as follows:
(a) KTEH shall be entitled to receive and retain an amount equal to
fifteen percent (15%) of such monies as its distribution fee and to retain an
amount equal to any distribution expenses (as such distribution expenses are
defined in the attached "net proceeds" definition) incurred by KTEH in
connection with such exploitation.
(b) The balance of such monies shall be allocated and paid to ACM.
5. Advance. KTEH agrees to pay to ACM the sum of $430,000 in four equal
installments according to the following schedule. Each payment shall be made
on delivery of D3 master tapes of the episodes. The first payment shall be
made on delivery of episodes 1, 2, 3 and 4. The second payment shall be made
on delivery of episodes 5, 6 and 7. The third payment shall be made on
delivery of episodes 8, 9 and 10. The fourth and final payment shall be made
on delivery of episodes 11, 12 and 13. The sums paid pursuant to this
paragraph 5 shall be non-returnable, but shall be an advance against and
deducted from any and all royalties payable to ACM pursuant to paragraph 4
above.
6. Non Broadcast Ancillary Revenue. In consideration for the advances and
royalties paid hereunder, as well as its efforts as distributor of the
Program, KTEH shall be entitled to the following royalties. All monies
actually received by the ACM from the exploitation of non broadcast ancillary
rights shall be allocated and paid to KTEH as follows:
(a) Eight percent (8%) of gross profit received by ACM, defined as one
hundred percent (100%) of all revenue received by ACM less applicable fees and
commissions due agents, from the sale and licensing of non-broadcast ancillary
rights of educational products including, but not limited to, video tapes,
books and music tapes;
(b) Notwithstanding the foregoing paragraph 6(a), five percent (5%) of
gross profit received by ACM less any applicable fees and commissions due
agents from the sale and licensing of toys and clothing.
7. Delivery. ACM agrees to make delivery of all 13 episodes of the Program on
or before March 31, 1998. Notwithstanding anything to the contrary contained
elsewhere herein, it is expressly agreed that delivery of the Program to KTEH
will not be complete unless and until appropriate documents showing
insurance and the chain of title and clear ownership of the Program by ACM
have been both delivered to KTEH and approved by KTEH's attorneys (such
approval not to be unreasonably withheld). Such review of said insurance and
chain of title documents by KTEH's attorneys will not, however, relieve ACM
of any of its obligations to KTEH pursuant to the warranties and indemnity
clauses hereof.
8. Rights and Exclusivity. It is expressly understood and agreed that,
throughout the Term hereof KTEH shall be the sole and exclusive owner of all
rights to distribute, broadcast and engage in activities related to
broadcasting functions of the Program throughout the Territory. ACM expressly
represents, warrants and agrees that ACM has not prior to the date hereof and
will not hereafter make any grant to any third party which would or might in
any way limit or infringe upon the exclusive rights granted to KTEH hereunder.
9. Primary Market. The Parties hereto intend that the market for the Program
shall be U.S. public television stations and that the primary distribution
channel for reaching these stations shall be through the Program Resources
Group. KTEH will use its best efforts to attain maximum availability of the
Program to the U.S. public television households. However, given the
unpredictable nature of audience tastes, KTEH cannot and does not guarantee
any particular television rating level for the Program.
10. Time Slot. KTEH will broadcast the Program in a favorable time slot,
which is appropriate to children's programming. Given the independent nature
of U.S. public television station Programmers, KTEH cannot guarantee the time
slot for the Program on other stations, but will use its best efforts to
encourage other stations to utilize favorable time slots.
11. Third Party License. If, during the Term hereof, an unrelated third party
wishes to exclusively license the Program in the Territory, the Parties agree
to negotiate in good faith for the purposes of modifying or terminating this
Distribution Agreement, it being understood that such modification or
termination will involve compensating KTEH for the relinquishment of its
rights hereunder. Notwithstanding the foregoing, KTEH will have no obligation
to modify or terminate its rights hereunder if such modification or
termination would cause the breach of any contractual commitments KTEH might
have including, but not limited to, contracts with PRG or other public
television stations.
12. First Refusal. Notwithstanding the foregoing paragraph 11, in the event
ACM desires to license any rights in respect of the Program not granted to
KTEH, ACM shall notify KTEH thereof and the Parties hereto shall negotiate in
good faith for a period of thirty (30) days with regard to the terms of such
grant. If the parties cannot agree on such terms, then ACM shall be free to
grant such right to any third party; provided, however, that such third party
grant shall be without any force or effect unless and until ACM has notified
KTEH of the identity of such third party and all of the terms of such grant
and KTEH has failed, within five (5) business days of its receipt of such
notice, to accept such terms itself, it being understood that KTEH shall only
be required to accept monetary terms or other terms which may as easily be
performed by one person as another.
GENERAL TERMS
1. ACM acknowledges its status as an "independent producer" and, as such,
recognizes that KTEH has no obligation to withhold income taxes or FICA
payments or to make any other deductions from payments made to ACM under this
Agreement. Nothing in this Agreement entitles ACM to any KTEH fringe
benefits, such as insurance or pension contributions accorded to KTEH
employees.
2. Underwriters (funders) - and the content of underwriter credits -- must be
subject to KTEH's approval, which will not be unreasonably withheld.
Underwriter credits must be in accordance with standard PBS underwriting
guidelines.
3. ACM shall be responsible for the research, writing, producing, directing
and completion of the Program, including, but not limited to: over-seeing the
production schedule to be established, contractual negotiations for talent
and/or for rights to material owned by other parties, coordinating and
supervising the activities of production and post-production staff and crews
and other assigns and completion/delivery of final product. Any discrepancy
between the terms of this paragraph and the terms of the Facilities Agreement
shall be resolved by reference to the Facilities Agreement which shall
control.
(a) KTEH -- in its role as "Presenting Station" will provide reasonable
assistance to ACM within its means to help maximize ACM'S efforts and ensure
ACM'S fulfillment of its obligations under this Agreement.
(b) ACM shall retain creative control of the Program -- its design,
content and execution, and ultimate dispensation. KTEH shall have the right
to inspect at reasonable intervals any/all content produced for the Program,
to screen "rough cuts" and variations thereof, and to require changes to the
content, so as to ensure that Program meets with both KTEH and PBS standards
of content and technical execution, and is factually accurate, objective and
balanced in content.
(c) The Parties shall cooperate in good faith to resolve any
disagreements affecting creative and/or technical aspects of the Program.
However, ACM shall have sole authority over the creative/technical aspects of
the final outs of the Program.
5. KTEH shall be responsible for receiving, holding disbursing, and
accounting for all revenue from distributors of the Program in all media
throughout the Territory, and shall manage the disbursement of that revenue
as per the attached Net Proceeds Definition and disbursement schedule. KTEH
will release and report net proceeds to ACM. KTEH will keep or cause to be
kept, in accordance with generally accepted accounting principles, books and
records in which shall be entered accurately each transaction involving
distribution and other exploitation of the Program. All of said books and
records shall be open to reasonable inspection by ACM, subject to reasonable
notice to KTEH, and with the understanding that no such examination shall be
done more often than once per year. Said examination shall not interfere with
KTEH's normal business activities, and shall be conducted during normal
business hours. ACM will keep or cause to be kept, in accordance with
generally accepted accounting principles, books and records in which shall be
entered accurately each transaction involving exploitation of ancillary
rights of the Program. KTEH's right to examine such records shall be on the
same terms and conditions as the inspection rights granted to ACM hereunder.
6. KTEH shall make the following resources and/or services available
(subject to reasonable schedules) to ACM:
(a) With respect to fundraising, KTEH shall provide Executive Producer
counsel and review proposal narratives and budgets at no charge; KTEH's
Corporate Development staff will be made available for direct fund raising
consultation and KTEH agrees to submit to ACM prepared proposals to
foundations and corporations.
(b) With respect to Program distribution, KTEH will serve as the
Program's "Presenting Station" and shall provide liaison, negotiation, and
contractual services with Public Broadcasting Stations and the Program
Resources Group.
8. The Program shall be billed in all promotional print, broadcast, and
non-broadcast uses/exhibitors as "Produced in association with Public
Television Station KTEH," the exact wording of which shall be established by
the parties at a later date, and KTEH shall have the right to use the Program
and Program elements for purposes of Program promotion and advertising, uses
relating to entry of the Program into contests and festivals, promotion and
publicity for KTEH - TV in which KTEH - produced or co-produced
Programs are referenced, for use as "pledge gifts" in conduction with KTEH
membership drives, and for duplication for distributors' reviews and/or
similar marketing uses.
9. ACM represents and warrants that to the best of ACM'S knowledge it has
full power to enter into this Agreement, and all material developed and all
research conducted in connection with the Program are or will be original and
have been or will be lawfully obtained, and that neither the Program or any
part thereof, nor the exercise of any right granted therein, will violate or
infringe upon the trademark, trade name, copyright, right of privacy or
publicity, or any other property right of any person or entity, or defame,
libel, slander or otherwise injure any such person or entity.
(a) ACM shall pay for, or in any other legal way secure all rights,
licenses, and clearances of any third-party materials used in Program
(including, but not limited to archival materials, music, artwork,
photography, preproduced audio transcriptions, and or preproduced video/film
materials.)
(b) With respect to distribution of the Program, ACM shall be
responsible for securing all aforementioned rights, licenses, and clearances
necessary for the local and national distribution of the completed Program to
domestic (United States) public television. ACM will deliver the Program free
of any liens, claims, and encumbrances whatsoever in favor of any other
person or entity, together with all rights necessary to exploit the Program
in domestic public television and international television or other media
forms.
(c) Insurance. ACM will secure and maintain in full force and effect at
its sole cost and expense during the Term hereof a standard producer's
liability (errors and omissions) insurance policy issued by an admitted
California insurer with coverage of at least $1,000,000/$3,000,000 with
respect to the Program. Such policy shall name KTEH as an additional insured.
10. KTEH represents and warrants that it has full power to enter into this
Agreement and that it shall secure all rights in the products and services
contributed by KTEH necessary for the production and distribution of the
Program under this Agreement.
11. The parties agree to indemnify and hold each other harmless along with
each officer, director, controlling person, and agent of the parties, from
and against any and all loss, claim, damage, liability, or expense, and any
action in respect thereof, joint or several, together with any reasonable
costs or expenses (including attorneys' fees) incurred by any such person in
connection with any action, suit, proceeding, demand, assessment, or judgment
incident to any of the matters so indemnified against to which any such
person may become subject, due to or arising out of (1) the falsity or
inaccuracy of any representation or warranty herein; (2) any claim or
litigation involving any charge by third persons of violation or infringement
of their rights; or (3) the use of any material furnished by one party to the
other hereunder.
12. ACM and KTEH will work with one another to realize the completed Program.
Neither party has entered or will enter into any agreement with any other
party for the production and/or distribution of a childrens' Program based
upon the Xxxxx Xxxxx fundamental concept without the consent of the other
for the length of the Term hereof.
13. All right, title and interest in and to any and all footage recorded
hereunder and all reproductions, excerpts or Programs derived therefrom,
together with the performances embodied thereon, shall be and remain the sole
property of ACM, free from any claims whatsoever by anyone including any
claims by KTEH. All copyrights in and to any such footage, excerpts or
Program shall be and remain the sole and exclusive property of
ACM. KTEH agrees to cause to be affixed to the Program a copyright notice as
follows: -C- 1997 by American Champion Media, Inc.
14. Each party shall be deemed to be in default hereunder:
(a) If it breaches or defaults in the performance of any material
obligation hereof on its part to be performed, and fails to remedy the
same within a period of 30 days after receipt of written notice from the
other party specifying such breach or default: or
(b) If it files a voluntary petition in bankruptcy or files
petitions or answers seeking liquidation, dissolution or similar relief
under the Bankruptcy Act or the Bankruptcy Reform Act of 1978 or any
future Federal Bankruptcy Act or any other present or future Federal,
State or other statute or law regarding bankruptcy, insolvency or other
relief for debtors; or
(c) If a court of competent jurisdiction enters an order, judgment
or decree approving petitions filed against it seeking any liquidation,
dissolution or similar relief under the Bankruptcy Act or the Bankruptcy
Reform Act of 1978 or any future Federal Bankruptcy Act, or any other
present or future applicable Federal, State or other statute or law
relating to bankruptcy, insolvency or other relief for debtors.
(d) Upon the happening of any one or more of the above-mentioned
events, the non-breaching party shall have the right to cancel and
terminate this Agreement. Notwithstanding such termination, each party
shall remain fully liable to the other for any unpaid part of the
transaction obligation.
15. No Partnership. Nothing herein contained shall be construed to place the
parties in the relationship of partners nor constitute any party the agent of
any other party, and neither party shall have the power to obligate or bind
the other party in any manner whatsoever.
16. Notice. Any written notice required under any of the provisions of this
Agreement shall be deemed to have been properly served by delivery in person
to either party or by mailing such notice by first class mail to either party
at the respective addresses set forth above, except as such addresses may be
changed by notice in writing to the other party.
17. Interpretation. Regardless of the place of its physical execution, this
Agreement shall in all respects be interpreted, construed and governed by the
laws of the State of California.
18. Modification or Waiver. This Agreement constitutes the complete
understanding of the Parties. This Agreement may not be modified or altered
except by written instrument executed by KTEH and ACM. No waiver of any term
or condition of the Agreement or of any breach of the Agreement or any part
thereof, shall be deemed a waiver of any other term or condition of this
Agreement or of any later breach of the Agreement or any part thereof.
19. Disputes; Attorneys' Fees. In any action under this Agreement, including
litigation, the party which prevails will have all attorneys' fees and costs
paid by the losing party.
20. Assignment. This Agreement shall be binding upon the successors and
assigns of ACM. No assignment of the obligations of KTEH shall be binding
upon ACM without the prior written consent of ACM.
21. Construction. Whenever required by the context of this Agreement, the
singular will include the plural and vice versa; the neuter gender will
include the masculine and feminine and vise versa; and the word "person" will
include a corporation, partnership, form or other form of association.
22. Counterparts. This Agreement may be executed in two or more
counterparts, and when so executed will have the same force and effect as
through all signatures appeared on one document.
23. Covenant of Further Assurances. The parties agree to execute any other
documents and perform any other acts which are necessary or appropriate to
carry out the purposes of this Agreement.
24. Severability. If any term or provision of this Agreement is determined
to be illegal or unenforceable, the other terms and provisions will
nevertheless remain effective and will be enforced to the fullest extent
permitted by law.
25. Headings. The headings, titles and captions of Articles, Sections,
Subsections and paragraphs contained in this Agreement are inserted only as a
matter of convenience and for reference, and in no way define, limit, extend,
interpret or describe the scope of this Agreement or the intent of any
provisions hereof.
26. Remedies. The remedies of the Parties under this Agreement are
cumulative and shall not exclude any other remedies to which any Party may be
lawfully entitled.
IN WITNESS WHEREOF, the parties have duly executed and duly witnessed
this Agreement, which includes the Net Proceeds Definition attached hereto,
as of May 6th, 1997.
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KTEH
By /s/ X. X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx
President
AMERICAN CHAMPION MEDIA, INC.
By /s/ Xxxxxxx Xxxx
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Xxxxxxx Xxxx
Chief Executive Officer
