<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-KSB/A
(Mark One)
[X] AMENDED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1996
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1943
For the transition period from ________________ to _________________
Commission file number: 000-20759
AMERICAN ARTISTS FILM CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
MISSOURI 43-1717111
(State or jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1245 FOWLER ST., N.W. ATLANTA, GEORGIA 30318
(Address Principal Executive Offices) (Zip code)
Issuers telephone number, including area code (404) 876-7373
Securities registered under to Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12 (g) of the Exchange Act:
CLASS A COMMON STOCK, $.001 PAR VALUE PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No___
---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB.[_]
State issuer's revenues for its most recent fiscal year: $1,711,639
The aggregate market value of the voting stock held by non-affiliates of
the Registrant amounted to $3,970,010 at the close of business on December 1,
1996: Class A Common Stock, .001 par value, $3,970,010. There is no established
market for Class B Common Stock, $.001 par value.
State the number of shares outstanding of each of the issuer's classes of
common equity: 732,620 shares of Class A Common Stock, $.001 par value per
share, and 5,502,277 shares of Class B Common Stock, $.001 par value per share,
were outstanding at December 1, 1996.
Documents incorporated by reference: NONE
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: December 19, 1996
AMERICAN ARTISTS FILM CORPORATION
By : /s/ Steven D. Brown
-----------------------------------------
Steven D. Brown
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicate.
<TABLE>
<S> <C> <C>
/s/ Rex Hauck Director, Co-Chairman of the Board, December 19, 1996
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Rex Hauck and Co-President
/s/ Vivian Jones Director, Co-President December 19, 1996
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Vivian Jones
/s/ Robert A. Martinez Vice President/Finance, Treasurer December 19, 1996
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Robert A. Martinez
/s/ V. Robert Colton Director December 19, 1996
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V. Robert Colton
/s/ John W. Boyd Director December 19, 1996
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John W. Boyd
/s/ Malcolm C. Davenport, V Director December 19, 1996
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Malcolm C. Davenport, V
/s/ Ron L. Loveless Director December 19, 1996
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Ron L. Loveless
/s/ Glen Warren Director December 19, 1996
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Glen Warren
/s/ Dan Holloway Director December 19, 1996
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Dan Holloway
/s/ Norman Hoskin Director December 19, 1996
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Norman Hoskin
</TABLE>
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October 11, 1996
American Artists Film Corp.
1245 Fowler Street, NW
Atlanta, Georgia 30318
Attn.: Rex Hauck
Tel: (404) 876-7373
Fax: (404) 885-9831
RE: "TARGET EARTH"/TURNER ORIGINAL PRODUCTIONS
Dear Rex:
The following, together with all schedules and exhibits attached hereto and
incorporated herein (collectively, the "Agreement"), shall set forth the terms
and conditions of the agreement between American Artists Film Corp.
("Producer") and Turner Original Productions, Inc. ("TOP") with respect to the
development, production, financing and distribution of a proposed documentary
program presently entitled "Target Earth" (the "Program"). The Program shall be
approximately one (1) hour in length (i.e., approximately forty-five and
one-half (45:30) minutes excluding commercials, in accordance with the format
set forth in Exhibit E attached hereto) and presently is intended for initial
exhibition on the TBS Superstation (the "Superstation"). The format(s) of the
Program may be changed by TOP in its sole discretion by providing Producer
written notice thereof any time on or before Producer's delivery of the Rough
Cut of the Program hereunder. In consideration of the mutual covenants contained
herein, and the mutual benefits to be derived therefrom, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Producer and TOP hereby agree as follows:
I. Development.
-----------
A. Development Agreement.
---------------------
1. TOP engaged Producer pursuant to a letter agreement dated June 14,
1996 (the "Development Agreement") to prepare a Treatment (the
"Treatment"), a budget ("Budget") and a production schedule (the
"Schedule") for the Program and to engage in other customary and
usual preproduction activities. Producer acknowledges receipt of a
fee of Twenty Thousand Dollars ($20,000) (the "Development Fee")
due under the Development Agreement. The Development Agreement is
incorporated herein by this reference. To the extent this
Agreement or its Schedule A conflict with the Development
Agreement, this Agreement and its Schedule A shall control.
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this Agreement or its Schedule A conflict with the Development
Agreement, this Agreement and its Schedule A shall control.
2. By a letter agreement dated August 19, 1996, TOP provided Producer
with an advance (the "Advance") of Twenty-Five Thousand Dollars
($25,000).
3. The Treatment, Budget and Schedule were developed in accordance
with the Development Agreement and delivered as required therein.
B. Budget.
------
Producer developed a Budget for the Program which does not exceed
Three Hundred Fifty Thousand Dollars ($350,000). The Budget sets forth
the total cost, including any monies paid under the Development
Agreement, of completing and delivering the Program to TOP in
accordance with the terms and conditions of this Agreement. The Budget
does not include any allocation for a completion bond, contingency,
non-specific overhead or packaging fee, but does include, without
limitation, the fee to be retained by Producer, if any (the
"Producing/Overhead Fee"), which includes, without limitation, the
fees of all individual producers of the Program including, without
limitation, line producers, associate producers, co-producers and
executive producers, and overhead expenses including, without
limitation, office rent and legal fees, that Producer will incur in
connection with the production and delivery of the Program hereunder.
Notwithstanding anything to the contrary in this Agreement, in no
event shall any increase in the Budget (which may only be accomplished
in accordance with the terms and conditions of this Agreement)
increase or alter in any way the amount of the Producing/Overhead Fee.
C. Turnaround.
----------
In the event, for any reason, TOP elects not to proceed with or
abandons production of the Program, all rights in and to the Treatment
or any version thereof, and all versions of the Shooting Script and
the Script (as such terms are defined in Paragraph II A(1) below) and
the Program shall be assigned to Producer by TOP, subject to the
provisions of Paragraph I of Schedule A.
II. Production.
----------
The Program shall be produced in accordance with the Budget, the Schedule
and the Treatment and in accordance with the following:
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A. Production Process.
------------------
1. Production of the Program shall occur on a timely basis and shall
include, among other things, the preparation of a shooting script
(the "Shooting Script"); the preparation and submission to TOP,
for its review and approval, of the script for on-camera talent
sequences, if any, and narrations and off-camera voice-over talent
sequences for the Program (the "Script"); commencement and
completion of principal photography; the preparation of a rough
assembly ("Rough Assembly") of the Program; the preparation of a
rough cut ("Rough Cut"), accompanied by an updated Script; the
commencement and completion of photography of on-camera talent
sequences, if any, after TOP's approval of the Script; the editing
of the Rough Cut based upon TOP's comments and the inclusion of
any on-camera talent sequences (such edited Rough Cut to be
referred to as the "Fine Cut"), accompanied by an updated Script;
and the preparation of a final version on or before the Delivery
Date (defined in Paragraph II E below) which shall be submitted
for TOP's review and approval (the "Final Cut"). Notwithstanding
anything to the contrary in this Agreement, Producer agrees that
in no event shall Producer on-line the Program unless and until
TOP has expressly approved in writing picture lock ("Picture
Lock") of the Program. Producer agrees to research the subject
matter of the Program fully, and, in delivering the Shooting
Script, Script and other materials to TOP, Producer shall
identify, by footnote or otherwise, the sources, whether written
or oral, on which all factual assertions contained therein are
based.
2. In the event Producer engages a writer in connection with the
preparation of any written materials for the Program, the
selection of such writer and the terms of Producer's agreement
with such writer shall be subject to the prior written approval of
TOP. Without limiting the generality of the foregoing, the terms
of such writer's agreement shall provide, among other things, that
the results and proceeds of such writer's services shall be
created as a work-for-hire. In addition, TOP shall have the right
to cause Producer to hire a writer(s) or, in the event Producer
hires a writer as described above in this Paragraph II A(2),
another writer(s) to render writing services in connection with
the Program, and the selection of, and the terms of Producer's
agreement with, any such writer(s) or other writer(s) (as
applicable) shall be subject to TOP's prior written approval.
3. The parties understand and agree that Producer shall continue to
re-work and revise the Shooting Script and Script throughout the
production of the Program. Without limiting TOP's rights of
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approval hereunder, Producer agrees to consult in good faith with
TOP throughout all phases of pre-production, production and post-
production of the Program. The parties further understand and
agree that timely delivery of each draft or re-working of the
Shooting Script and Script and each cut of the Program is of the
essence of this Agreement.
B. Creative Control.
----------------
1. TOP shall have final creative control of the Program. In this
regard, TOP shall have approval of all key elements and
above-the-line personnel including, without limitation, the
producer(s), director(s), writer(s), all hosts and narrators, the
composer(s), replacements for any of the foregoing, the music,
title, Budget, Shooting Script, Script, Rough Assembly, Rough Cut,
Fine Cut, Picture Lock, Final Cut and the Schedule for the
Program. In addition, TOP shall have the right to designate the
title and all subtitles of the Program. In the exercise of its
approval rights hereunder, TOP shall have the right to request
changes which TOP, in its sole discretion, deems necessary or
desirable, and Producer acknowledges and agrees that any costs or
expenses beyond the Purchase Price incurred in connection with the
implementation of such changes shall be subject to the terms and
conditions of Paragraph III.B., below. In addition, TOP shall have
approval over the post-production facility(ies) selected by
Producer and shall have approval over the manner in which the
Program is edited and completed. TOP's rights of approval and
control shall also include, without limitation, the specific
rights set forth in Paragraph IV of Schedule A. None of the
foregoing shall be deemed approved by TOP unless such approval is
embodied in a writing signed by TOP.
2. TOP hereby preapproves Rex Hauck as the executive producer of the
Program.
3. Unless otherwise expressly provided in this Paragraph II, the
preapproval in this Paragraph II by TOP of any above-the-line
personnel shall in no event be deemed TOP's approval that the
services of such personnel may be subject to the provisions of any
collective bargaining agreement.
C. Producer's Rights and Obligations.
---------------------------------
1. TOP agrees that Producer shall serve as the production entity for
the Program. In the event Producer engages any other producer or
production company to provide services relating to the production,
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which engagement shall in all instances be subject to TOP's prior
written consent, Producer shall ensure that each producer or
production company complies with all of the requirements hereof.
Notwithstanding the foregoing, Producer's engagement of any such
producer or production company shall not relieve Producer of any
of its obligations hereunder. All payments to Producer hereunder
including, without limitation, all sums payable to Producer
pursuant to the Budget, shall be subject to Producer's full
compliance with the terms and provisions hereof and of Schedule A.
2. As part of Producer's obligations as the production entity of the
Program, Producer shall be responsible for entering into all
employment agreements, for obtaining all rights with respect to
music, film clips and Other Items (as defined in Paragraph V B(2)
of Schedule A) necessary for TOP's exploitation of its rights
hereunder, and for obtaining workers' compensation insurance, all
as set forth in Paragraphs V A, V B and V C of Schedule A. In this
regard, Producer shall be required to read and adhere to the
production manual (including, without limitation, the guidelines
and release forms contained therein) (the "Production Manual")
provided to Producer by TOP, and Producer agrees not to modify
such release forms without the prior written consent of TOP.
3. Producer shall be responsible for delivering the Program in
accordance with the provisions of Paragraph II E below, Paragraph
V D of Schedule A and the delivery schedule attached hereto as
Schedule C (the "Delivery Schedule"). Notwithstanding the
foregoing, Producer understands and agrees that except as may be
required by applicable federal law, in no event shall the services
rendered by any above-the-line personnel in connection with the
Program be subject to the provisions of any applicable collective
bargaining agreement including, without limitation, the collective
bargaining agreements of the Writers Guild of America ("WGA"),
Directors Guild of America ("DGA"), Screen Actors Guild ("SAG"),
American Federation of Radio and Television Artists ("AFTRA") and
American Federation of Musicians ("AFM"), unless otherwise
specifically pre-approved in writing by TOP.
D. Production Credits.
------------------
1. Producer shall cause all prints and copies of the Program to
include a production credit for Producer in the end titles of the
Program, the exact wording, placement, manner, size and style of
which credit shall be subject to TOP's prior written approval.
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2. If TOP so elects, Producer shall cause all prints and copies of
the Program to include a credit and logo for TOP in the end titles
of the Program. TOP shall also be entitled to designate individual
credits including, without limitation, up to two (2) individuals
as executive producers of the Program, one (1) individual as
supervising producer, one (1) individual as senior producer and
one (1) individual as production manager ("TOP's Designated
Individuals"). The exact wording, manner, style, size and
placement of such credits and logo shall be designated by TOP in
its sole and absolute discretion.
3. It is understood and agreed that Producer's right to receive said
production credits hereunder shall be subject to Producer's full
and faithful performance of its material obligations under this
Agreement. All other credits to be included in the Program shall
be subject to TOP's prior written approval.
4. Subject to prior written approval from TOP in each and every
instance and subject to compliance with applicable FCC regulations
and other applicable legal requirements (collectively "Legal
Requirements"), Producer shall be entitled to secure in-kind
benefits (e.g., reduced rate hotel rooms or airline tickets) in
exchange for on-screen credits in order to reduce costs set forth
in the Budget. In such event, fifty percent (50%) of the savings
from such in-kind benefits shall serve as a reduction of the
Purchase Price and fifty percent (50%) of the savings shall be
reinvested in the production of the Program, provided Producer
gives TOP a detailed accounting of the value of such benefits and
a detailed description of the manner in which such monies will be
reinvested. Moreover, in such event, Producer may include a single
shared card in the end titles of the Program containing all
credits for approved in-kind sponsors. The exact wording,
placement, manner, size and style of such credits shall be subject
to TOP's prior written approval and any applicable Legal
Requirements.
E. Delivery.
--------
1. On or before a date to be set forth in the Schedule, which shall
in no event be later than February 16, 1997 (the "Delivery Date"),
Producer shall, at its expense, deliver the Program and all
materials set forth in Schedule C (collectively, the "Delivery
Materials") to TOP in accordance with the terms and conditions of
Paragraph V D of Schedule A and the Delivery Schedule and Schedule
for the Program, it being understood that, without limiting the
provisions of Paragraphs IV A and V D of Schedule A, the Program
as delivered hereunder by Producer
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shall be suitable and ready for exhibition by means of television
and shall in all respects conform to the broadcast requirements
established by TOP. In addition, concurrently with the execution
of this Agreement, Producer shall provide TOP with a letter in the
form attached hereto as Schedule D granting TOP access to all
masters and elements, executed by a laboratory(ies) or other
facility(ies) pre-approved by TOP in writing, which shall
guarantee TOP and its Related Entities (defined in Paragraph VII A
of Schedule A) unrestricted access to all of the sound, tape and
other elements listed on the laboratory access letter.
2. Producer shall provide TOP with materials suitable for use in
public relations and promotional materials (the "PR Materials") as
reasonably requested by TOP on an ongoing basis, but no later than
January 4, 1997, at no additional charge. The PR Materials shall
include, without limitation, a three (3) to five (5) minute
trailer (the "Trailer"), dubs of taped footage, stills and other
items suitable and appropriate for use in this regard.
Notwithstanding anything to the contrary in the foregoing,
Producer shall deliver the Trailer to TOP within a reasonable
period of time prior to the appropriate programming marketing
event, as determined by TOP in its sole and absolute discretion
including, without limitation, MIP, MIPCOM and the Critics Tour.
III. Purchase Price.
--------------
A. Payment.
-------
In consideration of the rights granted to TOP under this Agreement,
and subject to the terms and conditions hereof and Producer's full and
faithful performance of its obligations hereunder, TOP shall pay
Producer a total sum equal to one hundred percent (100%) of the
approved Budget (the "Purchase Price"), less any sums included in the
Budget and paid by TOP pursuant to agreements identified in Paragraph
I A above and any other Budget items paid directly by TOP. It is
understood and agreed that in no event shall TOP be obligated to pay
Producer the final installment of the Purchase Price pursuant to
Paragraph III A(6) below prior to Producer's delivery and TOP's
approval and acceptance of all of the Delivery Materials including,
without limitation, any and all agreements, consents, releases and
licenses, as required by, and in accordance with, the terms hereof
including, without limitation, the provisions of Paragraphs V A(2), V
B and V D of Schedule A. The Purchase Price, less any payments made
pursuant to the Development Agreement and the letter agreements
described in Paragraph I.A. (which amounts shall be deducted from the
amount payable to Producer under subparagraph 1, below, and, if
necessary, the ensuing subparagraphs) shall be payable to Producer as
follows (provided, however, that in each instance below TOP shall have
no less than fifteen (15) days
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from its receipt of an invoice from Producer to make the applicable
payment):
1. Twenty percent (20%) of the Purchase Price upon the later of
execution of this Agreement or TOP's approval of the Treatment,
Budget and Schedule and its election to proceed with production;
2. Fifteen percent (15%) of the Purchase Price upon TOP's approval of
the Shooting Script and commencement of principal photography of
the Program;
3. Fifteen percent (15%) of the Purchase Price upon commencement of
post-production of the Program;
4. Fifteen percent (15%) of the Purchase Price following TOP's
approval of the Rough Cut, such approval not to be unreasonably
delayed;
5. Twenty percent (20%) of the Purchase Price following TOP's
approval of the Fine Cut, such approval not to be unreasonably
delayed;
6. Fifteen percent (15%) of the Purchase Price following Producer's
full delivery in conformity with Paragraph II E(1) and Schedule C
and TOP's approval and acceptance of the Program in accordance
with the terms and conditions hereof.
B. Deficit.
-------
It is specifically understood and agreed that TOP shall not be
responsible for the procurement or payment of any actual costs of
production or delivery of the Program beyond the Purchase Price (such
additional sums to be referred to as the "Deficit"), that any such
Deficit shall be solely the responsibility of Producer and that
neither TOP's approval of the Budget nor any other act or omission by
TOP contemplated herein shall be construed as constituting TOP's
agreement to pay any such Deficit. In the event Producer fails to pay
the Deficit, in addition to any other remedies which TOP may have,
either at law, in equity or otherwise hereunder, TOP shall, at its
election, have the right to proceed in accordance with the terms and
conditions of Paragraphs II and III of Schedule A.
C. Underages.
---------
In the event the actual costs of production and delivery of the
Program are less than the Purchase Price (such difference to be
referred to as "Underages"), Producer and TOP shall split any such
Underages equally.
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IV. Ownership, Copyright and Distribution.
-------------------------------------
A. Ownership and Copyright.
-----------------------
TOP shall have and retain throughout the universe, in perpetuity, the
exclusive ownership of all rights in and to the Program and Materials
(as defined in Paragraph I of Schedule A) including, without
limitation, all rights of copyright and copyright renewal therein and
including all rights set forth in Paragraph VI of Schedule A. In this
regard, it is specifically understood and agreed that the results and
proceeds of Producer's efforts in connection with the creation,
development, production and any other aspect of the Program and
Materials are hereby, and shall automatically upon rendition become,
the sole and exclusive property of TOP and/or its designee(s) as a
"work-for-hire" (as defined in Section 101 and established in Section
201(b) of the Copyright Act of 1976, as amended) created for TOP. To
the extent the work-for-hire doctrine is not recognized in a territory
or territories, Producer hereby irrevocably assigns and transfers to
TOP all of Producer's rights in and to any and all elements of the
Program and Materials and all rights and benefits acquired by Producer
by any means whatsoever in connection therewith. Producer agrees to
execute any and all further instruments which TOP deems necessary to
carry out the terms of this Paragraph IV A.
B. Distribution Rights.
-------------------
1. Generally.
---------
TOP's rights in and to the Program shall include, without
limitation, all Distribution Rights (defined in Paragraph VII A of
Schedule A) in the Program and Materials and any portions thereof,
and the right to authorize others to exercise such Distribution
Rights, throughout the universe, in any and all languages, in
perpetuity and in any and all media, whether now known or
hereafter devised, including, without limitation, the Television
Media, Video Media, Non-Theatrical Media, Theatrical Media and
Interactive/Electronic Publishing (all terms as defined in
Paragraph VII A of Schedule A). Without limiting the generality of
the foregoing, it is specifically understood and agreed that TOP
shall own and control all Incidental Rights (defined in Paragraph
VII A of Schedule A) in the Program and Materials and any portions
thereof and shall have the right, but not the obligation, to
exercise any and all of its Incidental Rights to the full extent
of its Distribution Rights hereunder. Producer shall be required
to obtain and deliver to TOP all rights necessary to enable TOP to
exercise the foregoing rights.
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2. No Continuing Obligations.
-------------------------
Except as otherwise provided in Paragraph IV.B.3., below, TOP's
exclusive ownership and control of the Program throughout the
universe shall be absolute and without any further obligation,
except as required hereunder, whatsoever to Producer or to any
third party.
3. Producer's Participations.
-------------------------
Subject to Producer's full and faithful compliance with its
obligations under this Agreement, Producer shall be entitled to
thirty percent (30%) of one hundred percent (100%) of
International Net Profits (defined in Paragraph VII A of Schedule
A), if any, forty percent (40%) of one hundred percent (100%) of
Internet Net Profits (defined in Exhibit I hereto), and forty
percent (40%) of one hundred percent (100%) of Publishing Net
Profits (defined in Exhibit I hereto), all to be computed, paid
and accounted for as provided in Paragraph VII C of Schedule A
(collectively, "Producer's Participations").
C. Remakes/Prequels/Sequels/Series.
-------------------------------
In the event the Program is produced in accordance with this
Agreement, TOP shall have the sole and exclusive right to develop,
produce, distribute or otherwise exploit any remake, prequel, sequel
or series related to the Program (collectively, "Subsequent
Production(s)"). Without limiting the generality of the foregoing, if
TOP thereafter desires to develop, produce, distribute or otherwise
exploit any Subsequent Production, TOP agrees that it shall so notify
Producer in writing and shall negotiate in good faith with Producer
for a period not less than thirty (30) days from Producer's receipt of
such notice to arrive at an agreement pertaining to the development,
production, distribution and other exploitation of any such Subsequent
Production. In the event TOP and Producer are unable to reach an
agreement within said thirty (30) day period, and TOP thereafter
receives and desires to accept any bona fide offer from any third
party pertaining to the development, production, distribution and/or
other exploitation of any such Subsequent Production which is equal to
or less favorable to TOP then Producer's final offer, TOP shall within
ten (10) business days of its receipt of each such offer give Producer
written notice of the specific terms and conditions thereof and the
name of such third party, and TOP shall offer to enter into an
agreement with Producer on the same terms and conditions as each such
offer. Producer shall then have a period of ten (10) business days
from its receipt of such notice in which to notify TOP of its desire
to accept any such offer. If Producer does not accept any such offer,
Producer's rights under this Paragraph IV C shall terminate. Except as
specifically
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provided in this Paragraph IV C, TOP shall have no further obligation
whatsoever to Producer in connection with any such Subsequent
Production.
D. Similar Subject Matter.
----------------------
In no event shall Producer or any of Producer's principal
representatives alone, or in conjunction with any other party(ies),
produce or exploit a documentary television program similar to or
based on the same or similar subject matter as the Program until the
expiration of one (1) year immediately following the initial
exhibition of the Program on the Superstation.
E. Rental and Lending Rights.
-------------------------
Without limiting the foregoing, Producer hereby irrevocably assigns,
licenses and grants to TOP throughout the universe, in perpetuity, any
and all rights which Producer has and/or hereafter may have to
authorize, prohibit and/or control the renting, lending, fixation,
reproduction and/or other exploitation of the Program by any media and
means now known or hereafter devised as may be conferred upon Producer
under applicable laws, regulations or directives in any jurisdiction
throughout the world, including, without limitation, any so-called
"rental and lending rights" pursuant to any European Economic
Community directives and/or enabling or implementing legislation, laws
or regulations enacted by the member nations of the European Economic
Community (collectively, "Rental and Lending Rights").
V. Representations and Warranties.
------------------------------
A. Producer hereby acknowledges and affirms the representations and
warranties set forth in Paragraph VIII of Schedule A and further
represents and warrants as follows:
1. Rex Hauck's Services:
---------------------
Producer has entered into a binding agreement with Rex Hauck
pursuant to which Producer has agreed to provide the services of
Rex Hauck as the executive producer of the Program. It is
specifically understood and agreed that Rex Hauck's services as
the executive producer of the Program are of the essence of this
Agreement and that if, for any reason, Rex Hauck does not render
such services, in addition to any other remedies which might be
available to TOP, either at law, in equity or otherwise hereunder,
TOP may elect, in its sole discretion, to rescind this Agreement
in its entirety and to receive full restitution of all amounts
theretofore paid in connection with the Program, together with
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interest thereon calculated from the time such sums were
originally paid to the time of repayment at TOP's Interest Rate
(as defined in Paragraph I of Schedule A).
2. Without limiting the provisions of Paragraph II C above, and
expressly subject to the terms and conditions of Paragraph II C,
above in the event Producer hires any above-the-line personnel
whose services in connection with the Program are subject to the
provisions of any applicable collective bargaining agreement, (a)
Producer shall be solely responsible for the payment of residuals
and the payment of any and all other costs, expenses, charges or
fees resulting from Producer's retention of such personnel, if
any, and any and all other payments resulting from Producer's
breach of Paragraph II C above, and (b) in the event subsection
(a) does not protect TOP from liability to a third party and
enable TOP to enjoy all of its rights hereunder, Producer shall,
at its expense, if TOP deems it necessary, become and remain
throughout the production of the Program a signator to the
collective bargaining agreements of all guilds, unions or labor
organizations representing such persons and Producer represents
and warrants that it will comply fully with all of the terms and
conditions of such agreement(s).
3. Producer is a corporation duly organized and existing under the
laws of the State of Georgia, is in good standing and is
authorized to do business wherever any pre-production, production
and post-production of the Program shall take place.
4. Producer has the financial capacity to perform its obligations
hereunder and shall maintain such capacity during the term of this
Agreement.
VI. Entire Agreement.
----------------
This Agreement, including the terms and conditions attached hereto,
constitutes the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof and supersedes all prior or
contemporaneous written or oral agreements and representations between the
parties with respect thereto. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
representatives, assignees and licensees as permitted hereunder. This
Agreement may be executed in counterparts. This Agreement may not be
amended or modified except by a written instrument executed by authorized
representatives of all parties hereto.
Sincerely,
TURNER ORIGINAL PRODUCTIONS, INC.
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<PAGE>
_______________________________________
Pat Mitchell
President
Turner Original Productions, Inc.
AGREED TO AND ACCEPTED BY:
AMERICAN ARTISTS FILM CORP.
By: /s/ J. Eric Vanatta
-------------------------------
Title: Vice President/Secretary
----------------------------
Date: Oct 24, 1996
-----------------------------
TURNER ORIGINAL PRODUCTIONS, INC.
By: /s/ Pat Mitchell
-------------------------------
Title: President
----------------------------
Date: 11/4/96
-----------------------------
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<PAGE>
SCHEDULE A
(STANDARD TERMS AND CONDITIONS)
The following Standard Terms and Conditions are hereby incorporated within the
agreement dated as of October 11, 1996 (the "Letter Agreement") between American
Artists Film Corp. ("Producer") and Turner Original Productions, Inc. ("TOP"),
as though fully set forth therein. The Letter Agreement, this Schedule A and
all schedules and exhibits attached hereto and incorporated herein by this
reference are hereinafter collectively referred to as the "Agreement". In the
event of any conflict between the terms of the Letter Agreement and this
Schedule A, the terms of the Letter Agreement shall control.
I. Turnaround:
----------
In the event TOP does not elect to produce or otherwise abandons
production of the Program under this Agreement, TOP shall assign to
Producer its rights in all materials written, developed or created in
connection with the production and/or development of the Program
hereunder including, without limitation, all treatments, scripts,
shooting scripts, outlines, out-takes, stock footage, trims, still
photographs, Other Items and other similar and dissimilar items
(collectively, "Materials"), except to the extent any such Materials
were owned by TOP or a Related Entity prior to the commencement of
production of the Program, and TOP shall have a lien ("Lien") on the
Materials in an amount (the "Secured Amount") equal to all monies
paid or reimbursed to Producer by TOP hereunder, together with simple
interest thereon calculated from the time said sums were paid or
reimbursed by TOP to the time of recoupment at a rate equal to two
and one-half percent (2-1/2%) above the prime lending rate charged by
the First Union National Bank of Georgia from time to time during
such period ("TOP's Interest Rate"). Producer agrees to provide all
documentation which TOP deems necessary or desirable in order to
perfect its Lien, including, without limitation, all appropriate UCC
statements. If TOP does not elect to produce the Program and Producer
at any time thereafter makes any disposition of the Materials (or any
substantial element thereof) or produces and/or in any way
facilitates the development and/or production of a program based, in
whole or in part, upon the same underlying rights or any treatment
(including, without limitation, the Treatment) for the Program (the
"Other Program"), Producer agrees that upon Producer's receipt of
first monies paid in connection with such disposition of such Other
Program (excluding monies paid in connection with the further
development of such Other Program), Producer shall pay, or cause to
be paid, to TOP all of such monies up to, and until TOP has been
reimbursed for, the Secured Amount; provided, however, that Producer
shall not be permitted to make any such disposition of the Materials
(or any substantial element thereof) or produce or facilitate the
production of any such Other Program for eighteen (18) months from
the date on which TOP elects not to produce the Program. Producer
shall cause TOP to be added to all insurance policies obtained in
connection with such Other Program as a named insured and shall
further indemnify, defend and hold harmless
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TOP, in accordance herewith, for any claims related to such Other
Program or the disposition of the Materials produced hereunder.
II. Deficit Financing:
-----------------
In the event Producer fails to pay the Deficit as described in
Paragraph III B of the Letter Agreement, in addition to any other
remedies which TOP may have, either at law, in equity or otherwise
hereunder, TOP shall have the right to terminate this Agreement.
Thereafter, all Materials written, created or developed in connection
with the Program, including, without limitation, the Shooting Script
and Script, if any, which are not exclusively owned by TOP under
Paragraph IV A of the Letter Agreement shall become and/or remain the
sole and exclusive property of TOP, and TOP may, in addition to any
other rights it may have, at law, in equity or otherwise hereunder,
exercise its rights under Paragraph III of this Schedule A and TOP
shall have no further obligation whatsoever to Producer. In the
alternative, TOP shall have the option, but not the obligation, to
pay the Deficit, or any portion thereof, and to direct Producer to
complete production of the Program in accordance herewith, in which
event that portion of the Deficit paid by TOP, along with interest
thereon at TOP's Interest Rate, shall be recoupable by TOP out of the
first monies, if any, otherwise payable to Producer in connection
with the exhibition, distribution and other exploitation of the
Program hereunder (including, without limitation, Producer's
Participations, if any) or recoverable from any additional monies
payable to Producer in connection with the Program by TOP or any
third party.
III. Takeover Rights:
---------------
Notwithstanding anything to the contrary herein, and in addition to
any and all other remedies available to TOP hereunder, at law or in
equity, if Producer fails to fund the Deficit, as set forth in
Paragraph III B of the Letter Agreement, or if Producer is ten
percent (10%) or more over the Budget as a whole at any time, or if
Producer is ten percent (10%) or more over the projected cash flow,
as reflected by the Budget, at any stage of production, or if
Producer is ten (10) days or more behind the Schedule for the
Program, or if Producer delivers a Rough Cut, Fine Cut or Final Cut
which substantially deviates from the Treatment, as reworked from
time to time, or which substantially fails to incorporate comments
given by TOP to Producer, TOP shall have the right to demand of
Producer proof reasonably satisfactory to TOP that Producer has the
capacity to complete and deliver the Program as required hereunder.
If Producer fails to make such satisfactory showing, Producer shall
be deemed in breach of this Agreement and TOP shall, at its option,
be deemed to have been appointed the manager and agent of Producer
for the purpose of completing the Program and Producer shall, at
TOP's request, place at TOP's disposal and under TOP's control, the
production account and any and all other assets, persons and
equipment employed and used by Producer in connection with production
of the Program, so as to allow TOP or its designee(s) to take over
production of the Program and complete such production in any manner
which TOP deems feasible or desirable in its sole discretion,
provided that TOP may use equipment owned by Producer and used in
connection with production of the Program, if any, only for
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purposes of continuing production of the Program. In such event, the
copyright and all rights of copyright and copyright renewal in the
Program, if any, not previously assigned or granted to TOP hereunder
and all other rights shall automatically become solely and
exclusively owned and controlled by TOP, and TOP shall not have any
further obligation whatsoever to Producer hereunder. In the event TOP
exercises its rights under this Paragraph III, TOP shall have no
obligation to provide any of the credits set forth in Paragraph II D
of the letter Agreement, nor shall TOP have any further obligation to
pay Producer hereunder. In this regard TOP shall not be obligated to
pay Producer's Participations or any monies which constitute the
Producing/Overhead Fee (as defined in Paragraph I B of the letter
Agreement) including, without limitation, the salaries of any line
producers, co-producers, associate producers and executive producers,
except as the parties may otherwise negotiate in good faith, and such
Producing/Overhead Fee shall not vest in Producer.
IV. Quality and Creative Control; Accounting Reports:
------------------------------------------------
A. Quality and Creative Control:
----------------------------
The Program shall be of high quality, meeting at least the same
production and content standards as similar programming currently
being produced for initial exhibition on commercial over-the-air
network television in the United States, shall be shot on beta-sp
and mastered on tape (Digital Beta), in color with a stereo
soundtrack in the English language, and shall not materially
deviate from the Shooting Script and Script approved hereunder by
TOP. As part of TOP's right of creative control, TOP shall have
the following specific rights:
1. The right to view and approve screenings of dailies and/or
the Rough Cut, Fine Cut and Final Cut of the Program, and all
versions thereof, at TOP's expense;
2. The right to send, at TOP's expense, its designee(s) to the
shooting set and to all editing sessions, meetings and
locations to observe the progress of production and/or post
production; and
3. The right to examine Producer's books and records, at
reasonable times and intervals, to determine whether the
production is proceeding on schedule and on budget.
B. Accounting Reports:
------------------
Producer shall, within fifteen (15) days following the end of
each calendar month during production of the Program, submit to
TOP accounting reports prepared on an accrual basis which shall
be itemized in the same manner as the Budget and prepared
according to the format shown in the Production Manual, and
Producer shall, at TOP's written request, provide TOP with
supporting documentation relating to such accounting reports,
including, without
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limitation, invoices, receipts and canceled checks. TOP shall
make such request only if it reasonably determines that it has a
need for such supporting documentation.
V. Producer's Rights and Obligations:
---------------------------------
Producer shall be responsible for entering into all employment
agreements, obtaining all rights with respect to music, film clips
and Other Items, obtaining workers' compensation insurance and
delivering the Program as follows:
A. Employment Agreements:
---------------------
1. All contracts for personnel, studio hire, purchase of goods
and services, laboratory work and all other licenses,
contracts and obligations in connection with the production
of the Program by Producer shall be made and entered into by
Producer in its own name, and all such contracts or
undertakings shall be consistent with the provisions of this
Agreement and the customary practices of the entertainment
industry with respect to projects similar to the Program.
Such contracts and undertakings shall not be terminated,
canceled, modified or rescinded in any manner which would or
might prejudice the rights of TOP. All such contracts shall
be assignable to TOP, or their designee(s), without
restriction. In the event any such contract is assigned to
TOP hereunder, TOP shall assume all of Producer's prospective
obligations thereunder in writing. Producer's agreements with
all third parties providing work in connection with the
Program shall provide that such works are works made for
hire.
2. Producer shall obtain all agreements, licenses and releases
with or from third parties necessary for TOP to exploit its
rights acquired hereunder, and all such agreements, licenses
and releases shall be subject to the terms hereof and to the
prior written approval of TOP, it being understood that in no
event shall TOP's approval of any agreement, license or
release pursuant to this Agreement constitute a waiver of any
of TOP's rights or Producer's obligations hereunder. Producer
shall deliver all such agreements, licenses and releases to
TOP along with delivery of the Rough Cut pursuant to
Paragraph II A(1) of the Letter Agreement; provided, however,
in the event any additional agreements, licenses and releases
are required in connection with the Fine Cut and/or Final
Cut, Producer shall deliver all such additional agreements,
licenses and releases to TOP along with delivery of the Fine
Cut and/or Final Cut (as applicable) pursuant to Paragraphs
II A(1) of the Letter Agreement. Producer shall be
responsible for the payment of all compensation to all below
and above-the-line personnel who render services in
connection with the Program, and no payments shall become due
and owing any such personnel in connection with the
exploitation of the Program in any and all media, whether now
known or hereafter devised, throughout the universe in
perpetuity. Without limiting Producer's obligations under
this Paragraph V A(2), TOP
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<PAGE>
shall have the right, but not the obligation, in its sole and
absolute discretion, to make any payments that may become due
and owing any vendors, suppliers, employees, film processing
laboratories or any other third parties who render services
or provide materials to Producer in connection with the
Program, and all such payments made by TOP shall be deducted
from any and all sums due and owing Producer hereunder
(including, without limitation, the Purchase Price).
3. Producer shall use reasonable good faith efforts to have all
members of the cast available on the set for appearances in
promotional announcements and still photographs, for no
additional compensation, which TOP may desire in connection
with the advertising and/or promotion of the Program or of
TOP generally.
4. Producer shall have all responsibilities of an employer,
including, without limitation, those arising under any
present or future legal requirements relating to worker's
compensation, insurance, social security, tax withholding,
pension, health and welfare plans under any legal
requirements or any applicable guild agreement.
5. Producer hereby agrees that all agreements that Producer
enters into with all third parties in connection with the
Program and/or the Treatment and Script shall provide that
all such third parties shall waive any right of droit moral
----- -----
or any similar right with respect to the Program and/or the
Treatment and Script and agree not to institute, support,
maintain or permit any action or lawsuit on the ground that
any motion picture or television production produced
thereunder (including, without limitation, the Program) or
any other exercise of the rights conveyed, granted and
assigned by such third parties to Producer thereunder,
constitutes an infringement of any right of droit moral or
----- -----
any similar right, or is in any way a defamation or
mutilation of the Program and/or the Treatment and Script, or
any part thereof, or of the reputation of such third parties,
or contains unauthorized variations, alterations,
modifications, changes or translations thereof.
B. Music, Film Clips and Other Items:
---------------------------------
1. Music:
-----
(a) Producer agrees that it shall engage the composer(s) of
any and all original music which may be incorporated in
the Program to compose, arrange and orchestrate such
original music under one or more binding agreement(s)
and Producer agrees that it shall ensure that such
agreement(s) shall indicate that the results and
proceeds of such composer's efforts shall be considered
works made for hire or, in the event the doctrine of
work-for-hire is not recognized in the applicable
jurisdiction, Producer shall require such composer(s)
to
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<PAGE>
assign to TOP or its designee(s) the whole of each such
composer's rights, title and interest in and to such
music throughout the universe in perpetuity (including,
without limitation, the copyright in and to such music
for the duration of such rights). In any event, the
terms and conditions of any such agreement(s) with any
such composer(s) shall be subject to TOP's written
approval.
(b) With regard to other musical compositions which are
incorporated in the Program, Producer agrees to obtain
and fully pay for, without any further obligation of
royalties or other deferred payments, any and all
necessary agreements, consents, releases and licenses,
including, without limitation, synchronization licenses
and master use licenses, which shall authorize Producer
and its assignees, licensees and designees to record,
cablecast, telecast, broadcast, transmit, perform,
exhibit and otherwise exploit the Program incorporating
such musical compositions in all media whatsoever,
whether now known or hereafter devised, throughout the
universe in perpetuity. In any event, Producer agrees
that it shall consult with TOP regarding all music
licenses and that the terms and conditions thereof
shall be subject to TOP's written approval. Producer
shall assign to TOP, or its designee(s), on demand, all
rights concerning such other musical compositions which
Producer shall acquire in accordance herewith. Producer
shall deliver all such music licenses to TOP along with
delivery of the Rough Cut pursuant to Paragraph II A(1)
of the Letter Agreement; provided, however, in the
event any additional music licenses are required in
connection with the Fine Cut and/or Final Cut, Producer
shall deliver all such additional music licenses to TOP
along with delivery of the Fine Cut and/or Final Cut
(as applicable) pursuant to Paragraph II A(1) of the
Letter Agreement.
2. Film Clips and Other Items:
--------------------------
Producer shall use due care in the selection, purchase, lease
and licensing of any items, including, without limitation,
film clips, still photographs, voice recordings and other
items of a similar or different nature (collectively, "Other
Items") to be used in connection with the production of the
Program, and Producer agrees to obtain and fully pay for any
and all necessary agreements, consents, releases and
licenses, which shall authorize TOP and its assignees,
licensees and designees to reproduce, cablecast, broadcast,
telecast, transmit, perform, exhibit and otherwise exploit in
all media whatsoever, whether now known or hereafter devised,
throughout the universe in perpetuity the likeness (and/or
sound, if applicable) of such Other Items as they are
incorporated in the Program and in any advertising and
promotion related to the Program. In any event, it is
specifically understood and agreed that TOP shall have
approval of all such agreements, consents, releases and
licenses, and Producer shall deliver all
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<PAGE>
such agreements, consents, releases and licenses to TOP along
with delivery of the Rough Cut pursuant to Paragraph II A(1)
of the Letter Agreement; provided, however, in the event any
additional agreements, consents, releases and licenses are
required in connection with the Fine Cut and/or Final Cut,
Producer shall deliver all such additional agreements,
consents, releases and licenses to TOP along with delivery of
the Fine Cut and/or Final Cut (as applicable) pursuant to
Paragraph II A(1) of the Letter Agreement. Producer shall
assign to TOP, or its designee(s), on demand all rights
concerning the use of such Other Items which Producer shall
obtain in accordance herewith.
C. Insurance:
---------
TOP shall seek to obtain, on Producer's behalf, insurance for the
Program. The cost of such insurance shall be charged against the
Budget and such policies shall include Producer as a named insured.
Such insurance shall contain such coverage, limits and deductibles as
are standard and customary for documentary programs which are similar
to the Program and which are produced for initial exhibition on
television in the United States. Such insurance typically includes
general liability insurance, cast insurance, if applicable, and errors
and omissions insurance. It is understood and agreed that Producer
shall be responsible for any and all deductibles under such insurance
coverage and shall be responsible for any deductibles under such
insurance coverage and obtaining workers' compensation insurance.
Producer shall require all independent contractors with which Producer
contracts in connection with the Program to carry workers'
compensation insurance for their employees, the cost of which shall
not be borne by TOP. Producer shall provide TOP with certificates of
insurance evidencing that Producer has obtained workers' compensation
insurance. Without limiting the generality of Paragraph XI G of this
Schedule A, Producer shall be deemed the applicant for any insurance
obtained by TOP on Producer's behalf and shall prepare all forms and
execute all documents related thereto and shall also perform any other
acts necessary to obtain and maintain such insurance. Producer shall
be required to furnish to TOP completed applications for all forms of
insurance required by TOP immediately following execution of this
Agreement; provided, however, that Producer shall have until the date
on which the Rough Cut must be delivered to TOP to furnish TOP with a
completed application for errors and omissions insurance. Nothing in
this paragraph shall serve to limit or alter Producer's obligations
under Paragraph IX of this Schedule A. TOP shall provide copies of
relevant policies to Producer upon Producer's request.
D. Delivery:
--------
1. On or before the Delivery Date, Producer shall, at its expense,
cause all of the Delivery Materials to be delivered to TOP at 1050
Techwood Drive, NW, Atlanta, Georgia, 30318, Attention: George
Puckhaber, or to such other location(s) as TOP may designate in
writing.
A-7
<PAGE>
2. Producer specifically acknowledges and agrees that timely
delivery of the Delivery Materials set forth above is of the
essence of this Agreement. In the event any or all of the
Delivery Materials delivered to TOP by Producer hereunder are
not, in TOP's sole reasonable judgment, of acceptable technical
quality, in addition to any other remedies which TOP may have, at
law, in equity or otherwise hereunder, TOP shall have the right
to require Producer, at its expense, to deliver forthwith
replacements for such unacceptable Delivery Materials, which
replacements shall meet the specifications and standards of
quality set forth herein.
VI. Copyright:
---------
1. It is specifically understood and agreed that as part of TOP's rights
as the sole and exclusive owner of the copyright and all rights of
copyright and copyright renewal in and to the Program throughout the
universe, TOP shall have the exclusive right and interest in and to
any royalty payments deriving from the Program to which it may be
entitled pursuant to Sections 111(d) and 119 of the Copyright Act of
1976, as now existing or hereafter amended (the "Copyright Act"), or
similar legislation that may hereafter be enacted, or from any other
entity collecting and distributing retransmission royalties anywhere
throughout the universe. TOP, or its designee(s), may, for its own
interests and the interests of Producer, make whatever application is
necessary to petition for such royalty payments. Producer agrees to do
all such acts and execute all such documents as TOP may, in its sole
discretion and at its expense, desire or require in order to comply
with the requirements of the Copyright Act, such similar legislation
or such other entity.
2. Without in any way limiting any provisions of the Letter Agreement,
TOP, on the one hand, and Producer, on the other hand, acknowledge and
agree that the following are in full and complete consideration of,
and constitute equitable remuneration for, the Rental and Lending
Rights, as defined in the Letter Agreement: (i) Within the
Producing/Overhead Fee and the Advance, if any, provided for in this
Agreement, not less than three and eight-tenths percent (3.8%) thereof
shall be deemed allocated to the Rental and Lending Rights, and, if
Producer's Participations are payable pursuant to this Agreement, not
less than three and eight-tenths percent (3.8%) thereof shall be
deemed allocated to the Rental and Lending Rights; (ii) any sums
payable to Producer with respect to the Rental and Lending Rights
under any applicable collective bargaining or other industry-wide
agreement; and (iii) the residuals payable to Producer under any such
collective bargaining or other industry-wide agreement with respect to
home video exploitation which are reasonably attributable to sale of
home video devices for rental purposes in the territories or
jurisdictions where Rental and Lending Rights are recognized. If under
the applicable law of any territory or jurisdiction, any additional or
different form of compensation is required to satisfy the requirement
of equitable remuneration, then it is agrees that the grant hereunder
to TOP of Rental and
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<PAGE>
Lending Rights shall nevertheless be fully effective, and TOP shall
pay Producer such compensation or, if necessary, the parties shall in
good faith negotiate the amount and nature thereof in accordance with
applicable law; provided, however, that if and to the extent permitted
by such law, all amounts described in (ii), (ii) and (iii) above shall
be applied against, and deducted from, any such additional
compensation.
VII. Distribution Rights:
-------------------
A. Definitions: As used in this Agreement, the following terms shall
have the following definitions:
1. "Distribution Rights": The exclusive right, but not the obligation,
to distribute, transmit, display, project, exhibit, license,
simulcast, cablecast, telecast, broadcast and otherwise exploit the
Program.
2. "Television Media": Any and all forms of television, whether now
known or hereafter devised, including, without limitation,
superstation telecast, free over-the-air television syndication,
network television, pay cable, basic cable, pay per view, satellite
television, DBS, STV, SMATV, MDS and MMDS, or any other
transmission and exhibition of the Program where the originating
transmission and ultimate viewing do not take place in immediate
proximity to one another.
3. "Video Media": Any and all forms of video devices, whether now
known or hereafter devised, including, without limitation, video
discs, video cassettes, and other playback devices causing a visual
image of the Program on the screen of a television receiver or any
other viewing device where the video device and viewing device are
in immediate proximity to one another.
4. "Non-Theatrical Media": Any and all forms of non-theatrical
exhibition, including, without limitation, film festivals,
previews, premiers, industry screenings, market testing, charitable
benefits, distribution to educational, institutional or other
organizations, airlines for in-flight exhibition, trains for in-
transit exhibition, ships-at-sea, remote corporate locations and
U.S. military bases.
5. "Theatrical Media": Any and all forms of exhibition in theaters or
similar locations in which a fee or admission charge is paid by the
viewing audience and specifically not including exhibition in Non-
Theatrical Media, Video Media and Television Media.
6. "Interactive/Electronic Publishing": The right to reproduce,
publish, adapt, distribute, display and perform the Program, or any
portion thereof, and also the right to license the foregoing
rights, for publication, distribution, display and/or performance
alone or in combination with other works (e.g.,
-----
A-9
<PAGE>
in complete, condensed, adapted or abridged versions, and in
compilations) in any manner intended to make the Program, or any
portion thereof, available in visual form (with or without audio)
for reading, viewing, manipulating and otherwise accessing
(whether sequentially or non-sequentially) by any electronic
means, method, device, process or medium for electronic
reproduction, publication, distribution or transmission, whether
now known or hereafter developed, including without limitation,
digital, optical and magnetic information storage and retrieval
systems, floppy diskette-based software, CD-ROM, silicon chip,
interactive software and discs, and on-line
electronic/telephonic, cable, fiber-optic or satellite-based
transmission. As used herein, the term "Interactive/Electronic
Media" specifically does not include Television Media, Video
Media or Non-Theatrical Media.
7. "Incidental Rights": Such rights include, without limitation, the
following rights:
(a) To translate the Program into any and all languages; to
change, transpose, revise, rearrange, edit, insert any logo
of TOP or its designee(s), add to and subtract from the
Program; and to advertise, merchandise, publicize, promote
and enter into any commercial ties with respect to the
Program, and to use the elements and the title thereof in
any manner and through any media whatsoever, whether now
known or hereafter devised, and to publish or cause to be
published in any and all languages and in serial form or
such other form (including, without limitation, publication
in newspapers, fan magazines and trade periodicals),
synopses, summaries, resumes and stories of the Program and
to use excerpts therefrom in any and all forms of
advertising and publicity whatsoever.
(b) To use all literary material written for the Program, all
stills, artwork and designs used in connection with the
Program, all film clips, recordings, trailers, sound tracks,
and any other tangible and intangible property relating to
the Program and all rights in and to the foregoing and all
subsidiary, ancillary and related rights, including, without
limitation, the right to produce prequels, sequels, remakes,
television series and any other additional pictures relating
to the Program, subject to any applicable terms and
conditions regarding same in the Letter Agreement,
merchandising and commercial tie-up rights, and the right to
use the names, likenesses and voices of all persons
rendering services in connection with the Program.
8. "Related Entities": The parent, subsidiaries and otherwise
affiliated entities of TOP and Producer.
9. "Related Station": Any television station, satellite delivered
cable program service, direct broadcast satellite system, cable
system, superstation,
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network or other entity or facility for the transmission of audio
and visual signals of any kind, owned or operated, in whole or in
part, by TOP or any Related Entity of TOP.
10. "Western Hemisphere Territory": All countries comprising North,
Central and South America and their respective territories,
possessions, protectorates, commonwealths (including, without
limitation, Puerto Rico) and, wherever located, their military
posts, government installations and ships-at-sea flying their
flags or whose principal ports of call are located therein, and
all countries, principalities, territories, protectorates,
colonies and other governmental entities of any kind or nature
whatsoever throughout the Caribbean (including, but not limited
to, those which are more specifically set forth in Schedule B,
attached hereto and incorporated herein by this reference) and
Bermuda.
11. "International Territory": All territories outside the Western
Hemisphere Territory.
12. "International Gross Receipts": Any and all sums actually paid to
and received by TOP in connection with TOP's exploitation of the
Program in the International Territory solely via Television
Media and Video Media, other than the exploitation of the Program
by any Related Station, it being understood that no share of any
advance or guarantee shall be included in International Gross
Receipts until it is fully earned and non-refundable and that all
refunds and rebates given by TOP shall be deducted from
International Gross Receipts.
13. "International Distribution Expenses": Any and all actual out-of-
pocket costs and expenses (plus interest at TOP's Interest Rate)
paid or incurred by TOP or any of its Related Entities, or on
behalf of TOP or any of its Related Entities by any third party,
including, without limitation, any third party distributor or
sub-distributor, in connection with the exploitation of TOP's
Television Media and Video Media rights hereunder in the
International Territory, including, without limitation, all
manufacturing, marketing, shipping and handling charges arising
from TOP's exploitation and distribution of the Program via Video
Media and all residuals to be paid by TOP hereunder, if any, and
other usual and customary costs and expenses of distribution
incurred in accordance with the standard and customary accounting
practices and procedures of the entertainment industry.
14. "International Distribution Fee": A sum equal to thirty-five
percent (35%) of International Gross Receipts which shall be
retained by TOP and shall be inclusive of all fees of
subdistributors which are Related Entities of TOP. In this
regard, it is specifically understood and agreed that TOP shall
have the right, in its sole discretion, to use unrelated
subdistributors; provided, however, that in the event unrelated
subdistributors are used, TOP shall be
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entitled to an administrative fee of ten percent (10%) of
applicable International Gross Receipts, but the combined fees of
TOP and such unrelated subdistributors shall not exceed fifty
percent (50%) of the applicable International Gross Receipts.
15. "International Net Profits": The amount of International Gross
Receipts remaining after deduction of the following amounts in
the following order: (i) TOP's International Distribution Fee,
(ii) TOP's International Distribution Expenses (it being
understood that no International Distribution Expense shall be
deducted from International Gross Receipts more than once) and
(iii) fifty percent (50%) of all costs charged to or incurred or
paid by TOP in connection with the development and/or production
of the Program, calculated in accordance with the standard and
customary accounting practices and procedures of the
entertainment industry, plus interest at TOP's Interest Rate.
B. Third Party Payments:
--------------------
It is specifically understood and agreed that Producer shall be solely
responsible for the payment of any and all compensation in connection
with the production, exhibition and distribution of the Program
payable to any individuals or entities rendering services or providing
materials used in connection with the production of the Program,
including, without limitation, any and all residuals, re-use fees,
royalties, deferments, bonuses or any other similar forms of
compensation whatsoever. Nothing contained in this Agreement shall
obligate TOP to pay or account to any third party in connection with
the production, distribution or other exploitation of the Program
hereunder.
C. Accounting:
----------
TOP agrees to maintain accurate books and records regarding
distribution of the Program as such distribution relates to Producer's
Participations and TOP agrees to account to Producer in connection
with Producer's Participations. In this regard, TOP agrees to deliver
to Producer no later than ninety (90) days after the end of each
Accounting Period (as defined below in this Paragraph VII C) a written
statement wazzu setting forth the amount of gross receipts received
from TOP's exploitation of the Program as such exploitation relates to
Producer's Participations, if any, during such Accounting Period or
stating that no such gross receipts were received during such
Accounting Period; provided, however, all statements shall be deemed
conclusive unless Producer has made specific objections thereto within
eighteen (18) months of the date of such statement. Such statement
shall set forth the amount, if any, of Producer's Participations and
shall be accompanied by any payment due Producer hereunder. Producer
shall have the right to examine TOP's books and records regarding
Producer's Participations once per Accounting Period and only during
reasonable hours and upon reasonable notice. For the purposes of this
A-12
<PAGE>
Agreement, the "Accounting Period" shall be semi-annual and shall
commence upon delivery of the Program hereunder. After three (3)
years, the Accounting Period shall become annual. TOP shall not be
obligated to provide a written statement to Producer if there have
been no gross receipts relating to Producer's Participations for any
two (2) consecutive Accounting Periods and shall not be required to
resume providing such written statements until the first Accounting
Period thereafter in which there are such gross receipts.
VIII. Producer's Representations and Warranties:
-----------------------------------------
Producer represents and warrants to TOP as follows:
A. Neither the Program nor any element thereof including without
limitation the Materials, nor the exploitation by TOP of any rights
acquired by it hereunder, shall defame, violate the rights of privacy
or publicity, or violate any copyright, trademark or service mark,
"droit d'auteur", common law or other right, including, without
limitation, any literary, dramatic, comedic, musical, distribution,
exhibition or photoplay right, of any person, firm or entity or
violate any other applicable law, provided that such representation
and warranty shall not apply to elements provided by TOP or a Related
Entity except to the extent that the manner of such use by Producer
gives rise to any claim.
B. Producer has the right to enter into this Agreement, to grant the
rights herein granted and to perform fully all of its obligations
hereunder. Producer has researched or will research the subject matter
of the Program fully. All material contained in the Shooting Script
and Script (and all drafts and re-workings thereof) shall be either
(i) wholly original with writer(s) duly employed by Producer and not
copied, in whole or in part, from any other work, or (ii) duly
licensed, or (iii) in the public domain. Producer's agreements with
all third parties providing work in connection with the Program shall
provide that such works are works made for hire. Producer has or shall
have acquired all rights necessary to Producer's grant of rights to
TOP hereunder including, without limitation, any and all rights in the
Shooting Script and Script (and all drafts and re-workings thereof)
and any other underlying literary material on which the Program shall
be based, and Producer is or shall prior to completion of the Program
become the sole owner of all such rights. Without limiting the
provisions of Paragraphs V A(2) and V B of this Schedule A and the
Delivery Schedule, Producer shall, at TOP's request, deliver to TOP
copies of all documents that evidence Producer's acquisition of such
rights including, without limitation, all certificates of copyright,
music synchronization licenses, music performing licenses, music
master recording licenses, still photo licenses, film or videotape
footage licenses and other appropriate licenses of all elements of the
Program.
C. With respect to each musical composition contained in the Program, the
performing rights necessary for exhibition of the Program are or will
be:
A-13
<PAGE>
1. controlled by American Society of Composers, Authors and
Publishers ("ASCAP"), Broadcast Music Inc. ("BMI") or SESAC;
2. in the public domain; or
3. owned by or licensed to Producer.
D. The credits which shall be contained in the Program shall be complete
and accurate and shall not omit any party or entity entitled to any
credit for providing services in connection with the Program, nor
shall any credit provided in the Program be inaccurate, improper or
insufficient under any applicable law.
E. None of the rights herein granted to TOP have been transferred to any
third party and said rights are free from any liens, claims and
encumbrances whatsoever in favor of any other party and have not been
in any way limited, diminished, or impaired. There are no claims,
litigation or other proceedings pending or threatened which might
adversely affect TOP's rights hereunder.
F. Producer shall conform to the requirements of Section 507 of the
Federal Communications Act concerning broadcast matter and disclosures
required thereunder, insofar as said Section 507 applies to persons
furnishing program material for television broadcasting, and the
Program shall not include any matter for which any money, service or
other valuable consideration shall be directly or indirectly paid or
promised to Producer by any third party, or accepted from or charged
to any third party by Producer. Producer shall exercise reasonable
diligence to inform its employees, agents and other persons with whom
it deals with directly or indirectly in connection with the Program of
the requirements of said Section 507. As used herein, the term
"service or other valuable consideration" shall not include any
service or property furnished without charge or at a nominal charge
for use in, or in connection with, the Program, unless such service or
property is furnished in consideration for an identification in a
broadcast of any person, product, service, trademark or brand name
beyond an identification which is reasonably related to the use of
such service or property within the Program.
IX. Indemnification:
---------------
A. Producer hereby agrees to assume liability for, and shall indemnify,
defend, protect, save and hold harmless TOP and its Related Entities,
and their respective agents, officers, directors, employees,
successors, licensees, assignees and attorneys, from and against, any
and all claims, counterclaims, actions, suits, costs, liabilities,
liens, judgments, obligations, losses, penalties, damages or expenses
of any nature whatsoever, including, without limitation, reasonable
attorneys' fees (including, without limitation, an applicable share of
in-house attorneys' costs and expenses) and court costs, whether fixed
or
A-14
<PAGE>
contingent, threatened or actual, known or unknown, liquidated or
unliquidated, of any kind or nature whatsoever (collectively,
"Claims"), imposed on, incurred by, or asserted against TOP and its
Related Entities, and their respective agents, officers, directors,
employees, successors, licensees, assignees and attorneys, by any
third party, arising out of or related to, or allegedly arising out of
or related to the Program or any breach or alleged breach of any
representation, warranty, covenant or obligation of Producer contained
in or made pursuant to this Agreement except to the extent any Claim
arises out of or relates to a breach by TOP of any of its
representations, warranties, covenants or obligations contained herein
or made pursuant hereto. Notwithstanding anything to the contrary
contained in this Agreement, Producer's obligation to indemnify,
defend and hold harmless TOP as provided in this Paragraph IX.A. shall
remain in full force and effect and shall not be modified or abridged
in any way in the event TOP exercises its right to accept from
Producer rights, representations and/or warranties from third parties
who appear in the Program or who provide services or materials in
connection with the Program inconsistent with the requirements
regarding same as provided throughout this Agreement.
B. TOP hereby agrees to assume liability for, and shall indemnify,
defend, protect, save and hold harmless Producer and its Related
Entities, and their respective agents, officers, directors, employees,
successors, licensees, assignees and attorneys, from and against, any
and all Claims (as defined in the preceding subparagraph A) imposed
on, incurred by, or asserted against Producer and its Related
Entities, and their respective agents, officers, directors, employees,
successors, licensees, assignees and attorneys, by any third party,
arising out of or related to, or allegedly arising out of or related
to any breach or alleged breach of any representation, warranty,
covenant or obligation of TOP contained in or made pursuant to this
Agreement, excluding any Claims arising out of or related to, at least
in part, a breach by Producer of any of its representations,
warranties, covenants or obligations contained herein or made pursuant
hereto.
C. For the purposes of this Agreement, the party being indemnified under
Paragraph IX A or B above shall be referred to as the "Indemnified
Party" and the party indemnifying the Indemnified Party thereunder
shall be referred to as the "Indemnifying Party". The Indemnified
Party shall as promptly as is reasonably practicable give the
Indemnifying Party written notice of all Claims that are brought or
asserted against it by any third party. After receiving such notice,
the Indemnifying Party shall assume and control the defense of such
Claims, including, without limitation, the disposition of such Claims
(by compromise, settlement or other resolution) and the employment of
counsel, at its own expense, reasonably acceptable to the Indemnified
Party. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party in the defense of such Claims
(including, without limitation, pending actions or proceedings which
are the subject of the indemnification under this Paragraph IX). The
Indemnified Party shall have the right to
A-15
<PAGE>
participate in the defense of all such Claims and employ separate
counsel, at its own expense, in connection therewith. The Indemnifying
Party shall obtain the written consent of the Indemnified Party with
respect to any settlement which involves more than a de minimis
----------
adverse effect on the Indemnified Party or in any way affects any of
the Indemnified Party's rights under this Agreement.
X. Press Releases/Publicity:
------------------------
The initial press releases for the Program shall be made by TOP and shall
include mention of Producer. If Producer desires to issue a press release
relating to the Program, Producer shall submit the text of any such press
release to TOP for its approval, which shall not be unreasonably withheld.
Without limiting Producer's obligations under Paragraph II.E.2 of the
Letter Agreement, TOP shall handle all publicity and advertising for the
Program.
XI. Miscellaneous:
-------------
A. Independent Contractors:
-----------------------
Producer and TOP are independent contractors with respect to each
other. Nothing herein shall create any association, partnership, joint
venture or agency relationship between the parties.
B. Attorney In Fact:
----------------
In the event Producer fails to take any action or execute any document
necessary to assign any rights of copyright or any agreements,
contracts, licenses, clearances, releases or consents as required
pursuant to the terms hereof, Producer hereby appoints TOP, or TOP's
designee(s), as Producer's attorney in fact to do all such acts and
execute all such documents, and it is hereby acknowledged that this
power is coupled with an interest.
C. Reservation of Rights.
---------------------
Notwithstanding anything to the contrary in this Agreement, TOP hereby
reserves the right to accept, review and approve any treatments,
outlines or synopses involving subject matter similar to that of the
Treatment as may be submitted by third parties, and to produce any
programs based on any such third party treatments, regardless of
whether TOP produces the Program based on the Treatment.
D. Default and Remedies:
--------------------
1. In the event TOP is in breach of any provision of this Agreement,
Producer specifically acknowledges and agrees that the damage, if
any, caused thereby will not be irreparable or otherwise
sufficient to entitle Producer to injunctive or other equitable
relief. Producer's rights and remedies in any
A-16
<PAGE>
such event shall be strictly limited to the right, if any, to
recover damages in an action at law. Producer shall not be
entitled by reason of any such breach to rescind this Agreement,
to restrain TOP's exercise of any of the rights granted to TOP
hereunder, or to enjoin or restrain the distribution or
exhibition of the Program hereunder in any media whatsoever,
whether now known or hereafter devised, or any advertising,
publicity or promotion in connection.
2. In the event Producer is in breach of any provision of this
Agreement, in addition to any and all other remedies, whether at
law, in equity or otherwise hereunder, which might be available
to TOP, Producer specifically acknowledges and agrees that the
services and product which it is providing to TOP hereunder are
of a unique nature such that the injury and damage resulting from
any default or breach by Producer shall not be adequately
compensated by a remedy at law; therefore, in addition to any
other remedies which TOP might have, TOP shall be entitled to
injunctive and other equitable relief.
3. All remedies, rights, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and shall not in
any way limit any other remedy, right, undertaking, obligation or
agreement of either party.
E. Force Majeure:
-------------
1. As used herein, "Force Majeure" shall mean and include any act of
God, inevitable accident, fire, lockout, strike or other labor
dispute, riot or civil commotion, act of public enemy, failure of
transportation facilities, enactment, rule, order or act of
government or governmental instrumentality (whether domestic or
foreign and whether federal, state or local, or the foreign
equivalent thereof), failure of technical facilities, or any
other cause of any nature whatsoever beyond the control of the
parties hereto which was not avoidable in the exercise of
reasonable care and foresight.
2. In the event production or delivery of the Program as required
hereunder is delayed as a result of any Force Majeure, the party
having knowledge of such Force Majeure shall immediately notify
the other party in writing as soon as practicable, specifying the
exact nature of the event or circumstances, and the parties shall
attempt, in good faith, to resolve any problems resulting from
such delay. In the event such problems cannot be adequately
resolved to both parties' satisfaction within six (6) months from
the date such Force Majeure commences, Producer or TOP shall have
the option of terminating this Agreement, in which event:
(a) TOP shall not be obligated to pay any further funds to
Producer hereunder;
A-17
<PAGE>
(b) All funds previously paid to Producer hereunder for which
Producer is not obligated to pay third parties for goods,
services or rights rendered or granted in connection with
the Program as provided hereunder and a prorata share of any
producing fee included in the Budget shall be refunded to
TOP; and
(c) All Materials (including, without limitation, the Shooting
Script and Script) shall be exclusively owned by TOP in
accordance with the provisions of Paragraph IV A of the
Letter Agreement. Without limiting the generality of the
foregoing, TOP shall notify Producer in writing in the event
TOP intends to continue or recommence production of the
Program at any time after termination hereof pursuant to
this Paragraph XI E(2). In so doing, if TOP determines in
good faith that the unspent portion of the Purchase Price is
sufficient to enable Producer to complete and deliver the
Program to TOP as required hereunder, Producer shall have
the right, exercisable by delivery of written notice to TOP
(which must be delivered within ten (10) business days of
Producer's receipt of said notice from TOP), to complete
production of the Program in accordance with the terms and
conditions set forth herein. On the other hand, if TOP
determines in good faith that the unspent portion of the
Purchase Price is insufficient to enable Producer to
complete and deliver the Program to TOP as required
hereunder, Producer shall have the right, exercisable in the
same manner as above, to enter good faith negotiations with
TOP to arrive at an agreement pertaining to Producer's
completion and delivery of the Program. If, under either
scenario, Producer fails to notify TOP within said ten (10)
business day period of Producer's intention to exercise its
right to complete production of the Program hereunder, or if
the parties fail to reach an agreement under the latter
scenario, TOP shall have no further obligation whatsoever to
Producer in connection with the Program.
(d) Except as expressly set forth in this Paragraph XI E(2),
Producer shall have no further rights hereunder whatsoever
following the termination of this Agreement as a result of
an event of Force Majeure.
F. Notices:
-------
All notices which either party hereto is required or may desire to
give to the other party hereunder shall be in writing and shall be
given either by personal delivery (including by means of overnight
delivery services), telegram, telex (toll prepaid), telecopy or other
electronic means or by registered or certified mail (postage prepaid),
air mail if available. Such notices shall be deemed given on the date
delivered, telegraphed, telexed, telecopied or otherwise delivered by
electronic means or, if mailed, on the date received. Until further
A-18
<PAGE>
notice, all notices given hereunder shall be addressed to Producer and
TOP as follows:
TO TOP:
------
Turner Original Productions, Inc.
1050 Techwood Drive, N.W.
Atlanta, Georgia 30318
Attn.: Louis Lettes
Vice President, Business Affairs
Tel # (404) 885-0916
Fax # (404) 885-0473
cc: Turner Original Productions, Inc.
1050 Techwood Drive, N.W.
Atlanta, Georgia 30318
Attn.: Pat Mitchell, President
Tel # (404) 885-4454
Fax # (404) 885-4433
cc: Turner Broadcasting System, Inc.
One CNN Center
P. O. Box 105366
Atlanta, Georgia 30348-5366
Attn.: Lee Brooks Rivera, Senior Counsel
Tel # (404) 827-4945
Fax # (404) 827-1995
TO PRODUCER:
-----------
American Artists Film Corp.
1245 Fowler St., NW
Atlanta, Georgia 30318
Attn.: Rex Hauck
Tel # (404) 876-7373
Fax # (404) 885-9831
G. Severability:
------------
Nothing contained in this Agreement shall be construed to require the
commission of any act contrary to law, statute, ordinance, order or
regulation, and wherever there is any conflict between any provision
of this Agreement and any of the foregoing, contrary to which the
parties hereto have no legal right to contract, such law, statute,
ordinance, order or regulation shall prevail; provided, however, in
such event: (a) the provision of this Agreement so affected shall be
limited only to the extent necessary to permit compliance with
A-19
<PAGE>
the minimum legal requirement; (b) no other provisions of this
Agreement shall be affected thereby; and (c) all such other provisions
shall continue in full force and effect. The parties shall negotiate
in good faith to replace any invalid, illegal or unenforceable
provision with a valid provision, the effect of which comes as close
as possible to that of such invalid, illegal or unenforceable
provision.
H. Further Documents:
-----------------
Each party hereto shall execute any and all further instruments which
either party may deem reasonably necessary, desirable or proper to
carry out the purposes of this Agreement.
I. Prior Agreements; Waivers; Paragraph Headings; Modification:
-----------------------------------------------------------
This Agreement supersedes all prior agreements and understandings
between the parties hereto, whether oral or written, pertaining to the
subject matter hereof. No waiver of any term or condition of this
Agreement shall be construed as a waiver of any other term or
condition hereof; nor shall any waiver of any default under this
Agreement be construed as a waiver of any other default hereunder. The
descriptive headings of the paragraphs of this Agreement are for
convenience only and do not constitute a part of this Agreement. This
Agreement may be modified only by a written instrument executed by the
parties hereto.
J. Governing Law; Service of Process:
---------------------------------
This Agreement shall in all respects be governed by, and construed in
accordance with, the laws of the state of Georgia applicable to
contracts entered into and to be fully performed therein, and the
parties hereto submit to the jurisdiction of the United States
District Court, Northern District of Georgia, and the Fulton County
Superior Court, in Atlanta, Georgia. Producer agrees that the service
of process by mail shall be effective service of same and that such
service will have the same effect as personal service within the state
of Georgia and will result in jurisdiction over Producer in the
appropriate forum in the state of Georgia.
K. Assignments:
-----------
Producer shall not assign any of its rights or obligations hereunder,
voluntarily or by operation of law, without the prior written consent
of TOP. Any purported assignment without such prior written consent
shall be null and void and of no force and effect. This Agreement, or
any part hereof, and TOP's rights and privileges hereunder, or any
part thereof (including, without limitation, the Materials), may be
freely assigned and licensed by TOP; and in the event of any such
assignment or license, this Agreement shall remain binding upon
Producer and inure to the benefit of any such assignee or
A-20
<PAGE>
licensee. TOP shall be relieved of its obligations hereunder if such
assignment is to: (i) a so-called "major" or "mini-major" (as
customarily understood in the motion picture industry) motion picture
producer or distributor or to a U.S. free, basic cable or pay cable
television network which assumes in writing all of TOP's obligations
under this Agreement; (ii) a financially responsible party which
assumes in writing all of TOP's obligations under this Agreement;
(iii) an entity into which TOP merges or is consolidated; (iv) an
entity which acquires all or substantially all of TOP's business and
assets; or (v) any Related Entity; in which event Producer agrees to
look only to such assignee for the fulfillment of all obligations
under this Agreement. Upon any assignment by TOP, other than to a
person or entity referred to in (i), (ii), (iii), (iv) or (v)
preceding, TOP shall remain secondarily liable for its obligations
under this Agreement.
L. Survival:
--------
All representations, warranties and indemnities contained herein or
made by either party in connection herewith shall survive the
execution, delivery, suspension, expiration and termination of this
Agreement or any provision hereof.
M. Screenings:
----------
Producer shall not, without TOP's prior written approval, authorize,
permit or conduct any screenings of the Program including screenings
for cast and crew.
- End of Schedule A -
<PAGE>
EXHIBIT I
(Additional Provisions)
The following Additional Provisions are hereby incorporated into the Agreement
dated as of October 11, 1996 between American Artists Film Corp. ("Producer")
and Turner Original Productions, Inc. ("TOP"), as though fully set forth
therein. The Letter Agreement, Schedule A, this Exhibit I and all schedules and
exhibits attached hereto and incorporated herein by this reference are
hereinafter collectively referred to as the "Agreement". In the event of any
conflict between the terms of the Letter Agreement, Schedule A and this Exhibit
I, the terms of this Exhibit I shall control.
1. Internet Rights.
---------------
(a) In the event TOP, either through itself, a related entity or
third party distributes and/or exploits the Program on the
Internet via the World Wide Web (the "Internet"), Producer shall
be entitled to receive forty percent (40%) of Internet Net
Profits (as defined below) received by TOP from such
exploitation. As used herein, the term "Internet Net Profits"
shall mean gross receipts received by TOP from licensing,
distribution, exploitation or other disposition of the Program
via the Internet ("Internet Gross Profits"), less (as applicable)
taxes, any third party fees or commissions payable to agents,
representatives or distributors, marketing costs, distribution
costs and expenses, bad debt, costs of Internet-related
production activities, all residuals to be paid by TOP arising
therefrom, if any, all of the foregoing as mutually agreed upon
by TOP and Producer, and any and all other costs and expenses as
may be mutually agreed upon between the parties. Notwithstanding
anything to the contrary contained in the foregoing, no share of
any advance or guarantee shall be included in Internet Gross
Profits until it is fully earned and non-refundable, and all
refunds given by TOP shall be deducted from Internet Gross
Profits.
(b) In the event TOP and its related entities are not interested in
exploiting the Program via the Internet, TOP shall provide
Producer written notice thereof. Thereafter, Producer, either
through itself, a related entity or third party, shall have the
right to exploit such rights. In such event, TOP shall be
entitled to receive forty percent (40%) of Internet Net Profits
received by Producer from the exploitation of the Program via the
Internet. For purposes of this Paragraph 1(b), the definition of
Internet Net Profits as stated above shall be revised as
appropriate to take into account that Producer, not TOP, is
distributing the Program via the Internet. In the event Producer
exploits the Program via the Internet, Producer agrees that it
shall work with TOP and its related entities to maximize cross-
promotional opportunities for the Program as distributed via
various media.
2. Book Publishing Rights.
----------------------
(a) In the event TOP, either through itself, a related entity or
third party publishes and distributes hard cover and/or paperback
book(s) based upon the Program ("Publishing Rights"), Producer
shall be entitled to receive forty percent (40%) of Publishing
Net Profits (as defined below) received by TOP from the
exploitation of the Publishing Rights. As used herein, the term
"Publishing Net Profits" shall mean gross receipts received by
TOP from licensing, distribution, exploitation or other
disposition of the Publishing Rights in the retail trade
worldwide ("Publishing Gross Profits"), less (as applicable)
taxes, shipping and handling, any third-party fees or commissions
payable to agents, representatives or distributors, marketing
costs, distribution costs and expenses, bad debt, all of the
foregoing as mutually agreed upon by TOP and Producer, and any
and all other costs and expenses as mutually agreed upon between
the parties. Notwithstanding anything to the contrary in the
foregoing, no share of any advance or guarantee shall be included
in Publishing Gross Profits until it is fully earned and non-
refundable, and all refunds given by TOP shall be deducted from
Publishing Gross Profits.
(b) In the event TOP and its related entities are not interested in
exploiting the Publishing Rights, Producer, TOP shall provide
Producer written notice thereof. Thereafter, Producer, either
Exhibit 1 - Page 1
<PAGE>
through itself, a related entity or a third party, shall have the
right to exploit the Publishing Rights. In such event, TOP shall
be entitled to receive forty percent (40%) of Publishing Net
Profits received by Producer from the exploitation of the
Publishing Rights. For purposes of this Paragraph 2(b), the
definition of Publishing Net Profits stated above shall be
revised as appropriate to take into account that Producer, not
TOP, is exploiting the Publishing Rights. In the event Producer
exploits the Publishing Rights, Producer agrees that it shall
work with TOP and its related entities to maximize cross-
promotional opportunities for the Program as distributed via
various media.
Exhibit 1 - Page 2
<PAGE>
SCHEDULE B
(LIST OF CARIBBEAN TERRITORIES)
Anegada
Antigua
Bahamas
Barbados
Barbuda
British Virgin Islands
Cayman Islands
Cuba
Dominica
Dominican Republic
Grenada
Guadeloupe
Haiti
Jamaica
Martinique
Montserrat
Netherlands Antilles
Aruba
Bonaire
Curacao
Saba
St. Eustatius
St. Barthelemy
St. Christopher-Nevis-Anguilla
St. Croix
St. John
St. Kitts
St. Lucia
St. Maarten
St. Thomas
St. Vincent and the Grenadines
Surinam
Trinidad and Tobago
Turks and Caicos Islands
Windward Islands
B-1
<PAGE>
SCHEDULE C
(DELIVERY SCHEDULE)
This schedule is to be used for the program "Target Earth". Shot on beta-sp and
mastered on tape (Digital Beta).
1. One (1) Digital Beta Broadcast Master (NTSC 525 line English language) of
the Program, which contains main and end titles, credits and inserts (whichever
is applicable). Audio shall be in stereo in the following configuration:
Channel One = Full Mix-left
Channel Two = Full Mix- right
Channel Three = Music & Effects left
Channel Four = Music & Effects right
2. One (1) Digital Beta International Master (NTSC 525 line English language)
of the Program with time code referenced to the digital beta master as listed in
item #1, which contains main and end titles, bumpers, credits and inserts
(whichever is applicable).
Channel One = Full Mix- Mono
Channel Two = Narration, Host On-camera, and VO
Channel Three = Music and Effects Only, filled, constant at mix
level
Channel Four = Production Sound & Dialogue (talking heads)
3. One (1) Digital Beta NTSC (525 line English language) textless
International Master of the Program with time code referenced to the digital
beta master as listed in item #1. Audio requirements must be in the same
configuration as item #2, specifically
Channel One = Full Mix- Mono
Channel Two = Narration, Host On-Camera, and VO
Channel Three = Music and Effects Only, filled, constant at mix
level
Channel Four = Production Sound and Dialogue
4. One (1) 3/4" and three (3) VHS NTSC (525 line English language) copies of
each Program in the series manufactured from the digital beta master as listed
in item #1. The 3/4" cassettes must have Visible Time Code, matching the D2
master listed in item #1.
5. One (1) 150mb Bernoulli disc, InFINit! compatible, containing all main and
end titles and credits and, if they exist, all text insert titles in the
program. Include a hard copy of what is on the disc.
6. All film and tape elements filmed, taped or licensed by Producer or on
behalf of Producer in connection with the Program (including all such materials
used in the Program and all outtakes) including, but not limited to, all graphic
elements, clip reels, sub masters, time code burn-ins, reference tapes, field
masters, camera rolls, original negatives, and camera and footage logs.
7. All pre-dubbing units and/ or pre-lay materials that were used to mix down
to the final dub master, and fully notated track assignment sheets for all
units. All units must be in perfect synchronization with the cut master (same
time code).
8. All original source music (on DAT audio or 1/4" high quality audio tape).
9. A fully executed composers agreement for all original music composed for
the Program.
10. A log of total running time and segment lengths for the Program conforming
in all respects to TOP's format.
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11. One (1) copy of the music cue sheet in standard form to be filed by TOP
showing the particulars of all music synchronized with the Program as follows:
title, composer(s) (for words and music), composer(s)' social security
number(s), publisher, composer(s) affiliations (ASCAP, BMI, or SESAC), how used
(visual of background, instrumental, and/or vocal), and timings. If pre-
existing master recordings are used in the soundtrack, include the name(s) of
performer(s), if applicable and name(s) of record album(s) and cut(s) used. If
music is in the public- domain, copies of applicable copyright reports
evidencing public domain status.
12. Duplicate originals of (i) all synchronization and performance licenses
issued in connection with non-original music embodied in the Program; (ii) all
masters use licenses issued in connection with pre-existing master recordings;
and (iii) all licenses bearing upon and pertaining to clip and other stock
footage clearances.
13. A copy of a final action and dialogue continuity script of the Program as
exists in the broadcast master in item # 1. This continuity must include all
narration, as well as all dialogue in the clips.
14. A statement of the proposed credits for the Program.
15. Copies of any and all other agreements and releases with third parties in
connection with the Program affecting, bearing upon or pertaining to any rights
acquired hereunder by TOP in the Program.
16. A log of all film clips, stock footage and still photographs contained in
the Program identifying each clip and indicating the source, length, placement
within the Program, rights obtained and license fee with respect to each clip or
photograph.
The above delivery items are to be shipped at the Producers expense to:
Turner Original Productions, Inc.
1050 Techwood Drive
Atlanta, Georgia 30318
Attention: George Puckhaber
* PLEASE NOTE: TOP shall be solely responsible for conducting all trademark and
other clearances of the title of the Program, and Producer shall
have no obligation with respect thereto.
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SCHEDULE D
(LABORATORY ACCESS LETTER)
Date:
Turner Original Productions, Inc.
1050 Techwood Drive, NW
Atlanta, Georgia 30318
Attn.: George Puckhaber
Re: "Target Earth"
Gentlemen:
We have been informed that you have acquired from American Artists Film
Corp. ("Licensor") certain exclusive rights to distribution and exhibition of
the documentary program entitled "Target Earth" ("Program").
At the request of Licensor, and in consideration of Licensor entering into
our agreement with Licensor, we are executing this Agreement relating to the
Program for the benefit of you and Licensor.
We represent to you that we now have, or may in the future have, in our
possession and under our control at our laboratory located at the following
material and properties relating to the Program including, but not limited to,
those designated and set forth below:
(LIST ALL ELEMENTS HELD BY LAB)
We agree that you and your duly authorized licensees, designees and
assignees shall at all times have complete and unencumbered access to all of the
foregoing materials and properties of the Program as well as all other materials
and properties of the Program now or hereafter in our possession or under our
control.
Except upon your written request or pursuant to your written direction, we
shall not allow any of such materials or properties to be removed from our
laboratory, nor shall we edit or alter any of the materials or properties
without your prior written consent. We agree to fill all your orders and those
of your duly authorized licensees and designees for duplicate tapes or any
picture or sound materials of any kind as well as for any other laboratory work
pertaining to the Program at prices not higher than our then prevailing prices.
We represent and agree that we do not and shall not assert against you or
any of your licensees and designees any claim or lien, statutory or otherwise,
against the Program or any of the materials or properties thereof which now or
hereafter may be held by us by reason of any work, labor, service or material
which we have performed or may perform or have furnished or may furnish to any
party other than yourselves.
We agree that the instructions, authorizations, directions, agreements and
representations herein contained in favor of you and your licensees and
designees are coupled with an interest on your part and may not be revoked,
rescinded or modified without your written consent.
We represent that the quality of the materials in our possession is
suitable for broadcast quality color prints and videotapes.
Very truly yours,
(Laboratory)
By:
We hereby consent to and approve of the execution of the foregoing
Agreement which is being executed at our request.
American Artists Film Corp.
By:
Its:
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<PAGE>
CREDIT GUIDELINES
. MAIN/OPENING CREDITS -- With the exceptions of the show and talent credits
TOP does not allow credits at the open of a program.
. PRODUCTION COMPANY SERVICES -- There may not be more than one screen credit
afforded to outside vendors hired by the Producer. In the case of a
production consultant employed by a consulting firm, TOP would prefer that
the consultant rather than the firm be credited, but not both.
. PRODUCTION COMPANY LOGOS -- The Production Company is entitled one screen
credit or logo. The Production Company credit or logo must be the last
element in the closing credit unit.
. AUDIO OVER END CREDITS -- The audio provided over closing credits must lend
itself to voice-over announcements which may be added live at the time of
broadcast. This means the closing credits must be free of any voice-over
and/or clashing musical lyrics which could not be faded down for network
voice-over announcements.
. "ACKNOWLEDGMENT" OR "SPECIAL THANKS" -- These credits should be minimized
and used only in the case of a significant contribution to the program. No
such credits should be promised without the prior written approval of TOP.
. PROOFREADING -- Careful proofreading of the credits is vital-- misspellings
and omissions are expensive, frustrating, annoying to correct, and may
result in legal liability.
. CREDIT DISK -- One 150mb Bernoulli disc (InFINit! compatible). Include a
hard copy of all main, insert (lower thirds), end titles and credits that
are on the disc. This should be delivered with the master.
. COPYRIGHT -- All copyright notices appear at the end of the program and
shall read:
(C) 199X TURNER ORIGINAL PRODUCTIONS INC.
"ALL RIGHTS RESERVED"
. TOP CREDITS -- TOP may designate up to two individuals as executive
producers, a senior producer, a supervising producer, and a production
manager for Turner Original Productions.
. TIME LIMITATIONS-
. Credits placed at the end of a program SIXTY (60) MINUTES IN LENGTH OR
LESS.
1. Exclusive of TOP and cast, credits placed at the end of the
program may not exceed a maximum of forty five seconds
(:45). Included in this category are credits required by
collective bargaining agreements, discretionary credits and
such consideration credits as prizes, transportation,
wardrobe, etc.
2. The maximum time allowance for all program credits,
inclusive of TOP and cast credits, may not exceed sixty
seconds (:60).
. Credits placed at the end of a program LONGER THAN SIXTY (60) MINUTES
BUT NOT MORE THAN TWO (2) HOURS IN LENGTH.
1. Exclusive of TOP and cast, credits placed at the end of the
program may not exceed a maximum of sixty seconds (:60).
Included in this category are credits required by collective
bargaining agreements, discretionary credits and such
consideration credits as prizes, transportation, wardrobe,
etc.
2. The maximum time allowance for all program credits,
inclusive of TOP and cast credits, may not exceed one minute
and fifteen seconds (1:15).
. APPROVAL -- All Program credits must be submitted to the TOP at least one
week prior to incorporation into the program for written approval.
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SCHEDULE F
TOP SAMPLE ONE-HOUR FORMAT for: "Target Earth"
Bars and Tone 1:00
Black :10
Countdown to First Video/Audio :10
SEGMENT CONTENT LENGTH BLACKS LENGTH
Segment One NOT LESS THAN 8:00 min.
- --------------------------------------------------------------------------------
BREAK 1 :15
- --------------------------------------------------------------------------------
Segment Two BETWEEN 6:00 - 8:00 min.
- --------------------------------------------------------------------------------
BREAK 2 :15
- --------------------------------------------------------------------------------
Segment Three BETWEEN 6:00 - 8:00 min.
- --------------------------------------------------------------------------------
BREAK 3 :15
- --------------------------------------------------------------------------------
Segment Four BETWEEN 6:00 - 8:00 min.
- --------------------------------------------------------------------------------
BREAK 4 :15
- --------------------------------------------------------------------------------
Segment Five BETWEEN 6:00 - 8:00 min.
- --------------------------------------------------------------------------------
BREAK 5 :15
- --------------------------------------------------------------------------------
SEGMENT SIX & CREDITS NOT LESS THAN 2:30 min.
- --------------------------------------------------------------------------------
TERMINAL BREAK :15
- --------------------------------------------------------------------------------
ACTUAL RUN TIME
Required Run Time 0:45:41**
Variance
. 15 Second blacks for breaks
F-1
