EXHIBIT 10.26
CONTINUING DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement") is entered into this 20th day of
April 1998 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 successfully completed the
production and distribution of thirteen one half hour episodes of a television
series called "Adventures With Xxxxx Xxxxx" (the "Program") and have
negotiated a transaction whereby ACM will produce and KTEH will distribute
twenty six more one half hour episodes and two one hour episodes of the
Program. The parties have separately negotiated a transaction wherein KTEH
will provide technical facilities for the continuing production of the series.
Principal Terms
1. Grant. ACM hereby grants to KTEH the sole and exclusive right 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 each
episode of the Program by KTEH in the Territory.
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 $900,000 in installments
according to the following schedule. Each payment shall be made on delivery of
acceptable digital masters tapes of the episodes. KTEH will pay ACM $30,000
for each half hour episode delivered to KTEH and $60,000 for each one hour
episode delivered to KTEH. The sums paid pursuant to this paragraph 5 shall be
non-returnable.
6. Other Revenue. In consideration for the advances and royalties paid
hereunder, as well as its ongoing efforts in the creation, production,
marketing and distribution of the Program, KTEH shall be entitled to the
following royalties. All monies actually received by ACM from the exploitation
of the rights hereunder 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 any 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.
(c) Notwithstanding anything to the contrary is this Continuing Distribution
Agreement or any other agreement between the Parties, in the event ACM elects
at any time, now or in the future, to produce, distribute, sell, or license
"Adventures With Xxxxx Xxxxx" (or any program substantially similar to it) to
any media now or hereinafter invented, KTEH shall be entitled to five percent
(5%) of ACM's gross profit from such production, distribution, sale or
license. For the avoidance of doubt, this paragraph 6(c) is intended to cover,
among other things, situations in which for a profit broadcast network
acquires the rights to create and/or broadcast future episodes of the Program.
(d) In the event the Program or any episode thereof is not broadcast on any
television station throughout the territory for a period of three (3) years
and is thereafter broadcast in the fourth year on any station, the percentage
of gross profits referred to in paragraphs 6(a) and 6(b), above, shall each be
reduced by two percent (2%). In the event the Program or any episode thereof
is not broadcast on any television station throughout the territory for a
period of four (4) years and is thereafter broadcast on any station, the
percentage of gross profits referred to in paragraphs 6(a) and 6(b), above,
shall each be reduced by three percent (3%). In the event the Program or any
episode thereof is not broadcast on any television station throughout the
territory for a period of five (5) or more years and is thereafter broadcast
at any time on any station, the percentage of gross profits referred to in
paragraphs 6(a) and 6(b), above, shall each be reduced by four percent (4%).
7. Delivery. ACM agrees to make delivery of all 28 episodes of the Program on
or before May 31, 2000. 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
during the term of this agreement.
9. Primary Market. The Parties hereto intend that the market for the Program
shall be U.S. public television stations. KTEH will use its best efforts to
attain maximum availability of the Program to 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. KTEH will also have the right to approve production
credits for the Program to insure they are appropriate for PBS distribution
standards.
(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 cuts 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 fund raising, 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.
7. The Program shall be billed in all promotional print, broadcast, and
non-broadcast uses/exhibitions 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 conjunction with KTEH membership
drives, and for duplication for distributors' reviews and/or similar marketing
uses.
8. 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 will all rights necessary to exploit the Program in domestic
public television and 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.
9. 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.
10. 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.
11. 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.
12. 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 trademarks and copyrights in and to any such footage,
characters, 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 1998 (or 1999 or 2000) by American Champion Media, Inc.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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 vice versa; and the word "person" will
include a corporation, partnership, firm or other form of association.
21. 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.
22. 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.
23. Continuing Obligation. The obligations of both ACM and KTEH to pay
royalties hereunder shall survive the termination 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.
27. Variance in Agreements. This Continuing Distribution Agreement supercedes
the Distribution Agreement between the Parties dated May 6, 1997. Except where
the specific context requires a different interpretation, any variation
between the terms of the two agreements should be governed by the terms
contained herein.
IN WITNESS WHEREOF, the parties have duly executed and duly witness
this Agreement, which includes the Net Proceeds Definition attached hereto, as
of April 20, 1998.
KTEH FOUNDATION
By: /s/ Xxx Xxxxxxx, President
Name & Title
AMERICAN CHAMPION MEDIA, INC.
By: /s/ Xxxxxxx X. Xxxx, Chief Executive Officer
Name & Title
NET PROCEEDS DEFINITION
For the purpose of this Agreement, Net Proceeds shall be defined as follows:
1. Net Proceeds as of the end of a calendar quarter shall equal
Cumulative Gross Receipts at the end of that quarter less the Cumulative
Expenses.
2. Cumulative Gross Receipts shall mean all funds through the end of the
calendar quarter received by KTEH from the exploitation of the rights granted
to it by this Agreement, including but not limited to, grants from
foundations, corporate sponsorships and donations, and revenue received from
distribution of the Program under the rights granted to KTEH.
3. Cumulative Expenses shall mean direct distribution expenses and fees
in connection therewith actually paid by KTEH, but shall not include salaries
paid by KTEH to its regular staff.
4. All Net Proceeds received by KTEH shall be allocated as set forth below,
except for tile initial Net Proceeds of $l00, 000 which shall be allocated
entirely to KTEH for its distribution efforts. An accounting report on Net
Proceeds shall be provided by KTEH to ACM, and the related payment if any
shall he made by KTEH to ACM, within 30 days after the end of every calendar
quarter.
a) Fifteen percent (15%) shall be allocated to KTEH
b) Eighty five percent (85%) shall be allocated to ACM
