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EXHIBIT 10.46
Xxxx Xxx Media, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
February 2, 2000
KBNHA Enterprises, Inc.
c/o The Firm
0000 Xxxxxxxx Xxxx.
Xxxxx 000X
Xxxxxxx Xxxxx, XX 00000
RE: XxxxXxxxxx Xxxx/Xxxx Xxx Media
Gentlemen:
The following will set forth the agreement between Xxxx Xxx Media ("SLM")
and KBNHA Enterprises, Inc. ("KBNHA ") f/s/o Xxxxxxxx Xxxxxx, Xxxxxxxxx X.
XxXxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxxxxxxx and Xxxxx Xxxxxx Xxxxxxxx,
professionally collectively known as "The Xxxxxxxxxx Xxxx" with respect to that
certain property tentatively entitled "The Backstreet Project" which features
superhero-type versions of the actual members of the Xxxxxxxxxx Xxxx (the
"Property"):
1. KBNHA has prepared and submitted a written proposal for the Property
(herein such proposal being referred to as the "Assigned Material"). SLM
shall develop the Property including, without limitation, add or enhance
the story lines, scripts, characters, art, etc. (collectively, the
"Enhancements"). The Assigned Material together with the Enhancements are
referred to as the Property.
2. KBNHA and SLM will share equally, subject to paragraph 9 below, in all
rights of every kind and nature in and to the Property including, without
limitation, the right to exploit same in all manner and media, as well as
all merchandising rights, etc. (the "Rights").
3. The parties mutually shall approve all creative elements of the Property;
provided, KBNHA shall designate one person as its approval liaison.
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a) SLM shall submit each project (such as an individual Webisode or
comic book, defined as a "Project") for KBNHA 's approval in the
form of scripts, storyboards or otherwise. KBNHA shall notify SLM of
any reasonable, required changes within 10 business days. So long as
SLM complies with such requested changes, KBNHA shall be deemed to
have approved the particular element.
b) With respect to the first Project produced by SLM (e.g., the initial
Webisode or comic book), if SLM fails or refuses to comply with
changes requested by KBNHA within a reasonable period, KBNHA shall
have the right to terminate this agreement by written notice, in
which event all rights to the Assigned Material shall revert to
KBNHA and all rights to the Enhancements will vest with SLM, it
being understood that the Enhancements cannot be exploited to the
extent same are identified with The Xxxxxxxxxx Xxxx.
c) After creation of the first Project, KBNHA shall not have the right
to terminate this agreement unless:
i) SLM ceases without consent to continue to produce new Projects
within 30 days after written notice from KBNHA ; or
ii) SLM produces Webisodes or comic books which shall not have
reasonably been approved by KBNHA as set forth in
sub-paragraph (a) above.
iii) SLM terminates its relationship with Xxxx Xxx.
4. Xxxx Xxx and Xxxx Xxxxxx shall share "created by" credit with respect to
the Property and Enhancements; provided, neither shall receive any
additional compensation in connection therewith.
5. SLM shall produce an initial twelve (12) "Webisodes" based on the
Property, consisting of animated episodes of approximate five (5) minute
duration for initial exploitation over the Internet at websites mutually
designated by the parties but including in all events any websites owned
or operated by SLM and, if SLM and KBNHA can work out a mutually
acceptable agreement with Shockwave, via the "Shockwave" website. It is
understood that a mutually acceptable deal with Shockwave will include
equity in Shockwave. At SLM's discretion, SLM shall have the right
initially to produce more or less than 12 Webisodes of more or less than 5
minutes duration, with the intention that the total, initial minutes of
production shall approximate one hour. SLM shall have the right, at its
sole discretion, to produce additional
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Webisodes featuring the Property, totalling no more than 120 minutes per
year (each such year of production being deemed a "Production Year", with
the first such year commencing on execution hereof), for a period of four
Production Years from execution hereof. Notwithstanding the foregoing,
KBNHA shall have the right upon written notice to SLM no less than 90 days
prior to the close of the second Production Year of the term to elect not
to proceed with the third and fourth Production Years of the term.
6. KBNHA will use best efforts to provide that a majority of the members of
The Xxxxxxxxxx Xxxx, personally, will participate with Xxxx Xxx in a press
conference to launch this agreement and to otherwise cooperate in
publicizing the Webisodes. It also is agreed that there shall be a
hyperlink at all official Xxxxxxxxxx Xxxx website(s), including
Xxxxxxxxxxxxxx.xxx, and the official website for the Xxxxxxxxxx Xxxx'
then-current management company, which is presently The Firm, which will
enable visitors to that site to go directly to the pages at which the
Webisodes are available for viewing (which pages shall be on a site with
the URL "Xxxxxxxxxxxxxxxxx.xxx" which shall be hosted by SLM); provided,
SLM agrees that such pages may be viewed within the frame of the
applicable Xxxxxxxxxx Xxxx website(s). SLM shall provide KBNHA with
database information pertaining to persons who view the Webisodes and
KBNHA and The Firm shall provide database information pertaining to
visitors to their official websites who view the Webisodes, it being
understood that neither party shall have the right to sell or license the
other party's database information to third parties, but shall solely have
the right to use same for each party's own marketing purposes.
7. SLM shall have the right to license the Property in all other manner and
media on such terms as SLM shall determine, but with KBNHA 's consultation
and approval in respect of each such license; provided, KBNHA shall not
withhold its approval in a manner to frustrate the purposes of this
agreement or the ability of SLM to recover its investment in the
Webisodes. SLM has been advised that KBNHA has a outstanding merchandising
agreement with Winterland which agreement affects merchandising rights in
the names and likenesses, and certain other identification related to The
Xxxxxxxxxx Xxxx.
8. SLM shall cause one comic book based on the property to be produced before
the release of the first Webisode hereunder, subject to KBNHA 's
reasonable approval. SLM shall cause additional comic books featuring the
Property to be produced and commercially exploited, in such number as the
number and content of the produced Webisodes merits, with the intention
that there will be one comic book for each 30 minutes of Webisodes
produced.
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9. All consideration derived from the exploitation of the Property (cash,
stock, etc.) shall be collected by SLM and allocated and paid in the
following sequence:
a) First, for SLM to recover any and all reasonable out-of-pocket costs
specifically incurred in connection with production and exploitation
of the Webisodes, Comic Books and other approved Projects (including
reasonable allocations for a portion of any SLM internal costs such
as salaries of SLM employees [other than Xxxx Xxx] to the extent
that same are rendering specific services on a Project) plus 15% of
all costs as a services fee in lieu of any costs not associated with
persons rendering specific services on a Project; and
b) Second, 35% to SLM and 65% to KBNHA.
c) KBNHA shall receive detailed breakdowns of all of the costs referred
to in (a) above, and shall have the right to review appropriate
back-up for any of the allocations addressed therein. It is
understood that without KBNHA approval the recoupable costs of a
single Webisode will not exceed $69,000 and of the initial creation
costs of a single comic book will not exceed $23,000 (not including
manufacturing and distribution costs). By way of clarification, once
SLM shall have recouped the costs referred to in 9(a) above, as
limited by this subparagraph (c), payments under 9(b) above shall
become payable on a prospective basis.
10. The term of the agreement shall continue in perpetuity with respect to all
produced Webisodes and the Property; provided, SLM shall not license the
Webisodes or Property for new exploitation after the date five years after
release of the last such Webisode without KBNHA 's reasonable approval.
11. KBNHA will not authorize any other superhero exploitations of the
Xxxxxxxxxx Xxxx during the term. KBNHA shall not otherwise be restricted
hereunder.
12. Pursuant to the Stock Option Agreement annexed hereto as an exhibit, so
long as KBNHA shall not be in material breach of its obligations
hereunder, KBNHA will receive warrants for 300,000 shares of SLM stock at
an exercise price of $7.00 per share, which warrants will vest as follows:
75,000 on execution hereof, 25,000 upon the initial webcast of the first
Webisode (but not later than 6 months after execution hereof unless KBNHA
shall have failed to approve the first Webisode by such date), 50,000 upon
the
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commencement of the 13th month of the term, 50,000 upon the commencement
of the 19th month of the term, and (so long as KBNHA shall not have
exercised its option not to proceed with the third Production Year) 50,000
shares on the commencement of the 25th month of the term hereof and a
final 50,000 shares on the commencement of the 37th month of the term
hereof. The vesting of applicable portions the foregoing shares shall be
contingent on KBNHA having approved the production of all required
Webisodes during the prior Production Years of the term.
13. SLM will compute Gross Revenues as of each March 31, June 30, September 30
and December 31 for the prior three (3) months. Within ninety (90) days
after each calendar quarterly period concerned, SLM will send KBNHA a
statement covering Gross Revenues and will pay KBNHA KBNHA 's share of
Gross Revenues due.
a) SLM will maintain accurate books and records which report the
recognition of Gross Revenues. KBNHA may, at its own expenses,
examine and copy those books and records, as provided in this
paragraph. KBNHA may make such an examination for a particular
statement within three (3) years after the date when the other party
sends the examining party the statement concerned. KBNHA may make
those examinations only during SLM's usual business hours, and at
the place where it keeps the books and records. Such books and
records shall be kept at the SLM office in Los Angeles, California,
unless otherwise notified. KBNHA will be required to notify SLM at
least ten (10) days before the date of planned examination.
14. Each party agrees to take all action and cooperate as is reasonably
necessary, at the other party's request and expense, to protect the
other's respective rights, titles, and interests, and further agrees to
execute any documents that might be necessary to perfect each party's
ownership of such rights, titles, and interests.
15. WARRANTIES; REPRESENTATIONS; INDEMNITIES:
a) KBNHA represents and warrants that:
i) it has full power and authority to enter into this Agreement.
ii) it has sufficient right and authority to grant to SLM all
licenses and rights granted by KBNHA hereunder.
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iii) the Assigned Material and the use thereof as permitted
pursuant to this Agreement shall not violate any law or
infringe upon or violate any rights of any Person.
b) SLM represents and warrants that:
i) it is has the full power and authority to enter into and fully
perform this Agreement.
ii) the Enhancements developed or furnished by SLM hereunder and
the use thereof shall not violate any law or infringe upon or
violate any rights of any Person.
c) Each party shall at all times indemnify, hold harmless and defend
the other party from and against any and all claims, losses,
liability, costs and expenses (including but not limited to
attorneys' fees) to the extent arising from or relating to any
breach or alleged breach of this agreement by the indemnifying
party.
16. GENERAL:
a) Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other
party's prior written consent. Any attempt to assign this Agreement
without such consent shall be void and of no effect ab initio.
Notwithstanding the foregoing, either party may assign this
Agreement to any entity controlling, controlled by or under common
control with, the assignor, or to any entity that acquires the
assignor by purchase of stock or by merger or otherwise, or by
obtaining substantially all of the assignor's assets, provided that
any such assignee, or any division thereof, thereafter succeeds to
all of the rights and is subject to all of the obligations of the
assignor under this Agreement.
b) This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. Neither party shall
be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject
matter except as specifically set forth herein.
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c) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective when one or more such counterparts have been signed
by each of the parties and delivered to each of the other parties.
d) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. By an instrument in
writing, any two parties hereto may waive compliance by the third
party with any term or provision of this Agreement that such third
party was or is obligated to comply with or perform.
e) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California applicable to
agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
f) Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
g) If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any
Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforcability shall not affect any
other provision hereof (or the remaining portion thereof) or the
application of such provision to any other Persons or circumstances.
h) All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand
or sent, postage prepaid, by registered, certified or express mail
or reputable overnight courier service and shall be deemed given
when so delivered by hand, or if mailed, three days after mailing
(one business day in the case of express mail or overnight courier
service), to the addresses set forth above.
i) The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment,
franchise, or agency between the parties. Neither party shall have
the power to bind the other or incur obligations on the other's
behalf without the other's prior written consent.
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j) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
17. ZIFFREN, BRITTENHAM, BRANCA & XXXXXXX: The parties hereto acknowledge that
the Ziffren, Brittenham, Branca & Xxxxxxx law firm has, with the prior
consent of the parties, represented both Xxxx Xxx Media and certain
interests in KBNHA Enterprises, Inc. (together with other unrelated
counsel) in connection with the negotiation and documentation of this
agreement. Annexed hereto is a copy of a letter agreement affirming such
consent which is (or shall prior to the execution hereof) executed by the
parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first above written.
AGREED TO AND ACCEPTED
XXXX XXX MEDIA KBNHA ENTERPRISES, INC.
By: /s/ Gill Champion By: /s/ Xxxxx Xxxxxxxxxx
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Its: Vice President-COO Its:
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DATED: February 2000 DATED:
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The undersigned acknowledge that they have read the foregoing agreement,
consent to its execution and agree to be bound by the terms thereof as same may
affect them. The undersigned further acknowledge that KBNHA Enterprises, Inc.
has the right to enter into said agreement and, accordingly, guarantee the
performance of KBNHA Enterprises, Inc. of all of its undertakings thereunder.
The undersigned agree to look solely to KBNHA Enterprises, Inc. for any
compensation payable to them in connection with the foregoing.
/s/ Xxxxxxxx Xxxxxx /s/ Xxxxxxxxx X. XxXxxx
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Xxxxxxxx Xxxxxx Xxxxxxxxx X. XxXxxx
/s/ Xxxxxx Xxxxxxx /s/ Xxxxx Xxxxxxxxxx
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Xxxxxx Xxxxxxx Xxxxx Xxxxxxxxxx
/s/ Xxxxx Xxxxxx Xxxxxxxx
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Xxxxx Xxxxxx Xxxxxxxx
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