DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is made with effect from January 1,
1998 by and between Eclipse Entertainment Group, Inc. ("Eclipse")
located at 10900 N.E. 8th Street, Suite 900, Bellevue, WA 98004
and Westar Entertainment, Inc. ("Westar") located at 1732 S.
Sepulveda Boulevard, Los Angeles, CA 90025.
Whereas Eclipse is a producer of motion pictures for worldwide
distribution, and is also in the business of acquiring ownership
and worldwide distribution rights of motion pictures produced by
other independent producers (which motion pictures, whether
produced by Eclipse or acquired by Eclipse now or hereafter
during the Term of this Agreement are herein called the "Eclipse
Pictures").
And whereas Westar is a worldwide distributor of motion pictures.
In consideration of the respective covenants, conditions,
warranties and representations hereinafter contained, and for
other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
Exclusive Grant of License: Eclipse hereby engages Westar to be
the exclusive worldwide distributor of Eclipse Pictures. Westar
hereby accepts the exclusive distribution rights in and to the
Eclipse Pictures, including but not limited to, the right to
exhibit, distribute, lease, rent, sub-distribute, sell, reissue,
release, transmit, broadcast, project, exploit, advertise,
publicize, promote and market the Eclipse Pictures, prints and
trailers thereof, excerpts, clips or portions therefrom, the
sound and music synchronized therewith, the title or titles
thereof (including the right to change the English language title
and to authorize foreign language titles), and any by-products
thereof, throughout the Territory (as defined below) and all
incidental rights pertaining thereto necessary to allow Westar
the full exercise of the rights granted herein, by any and all
media, means, methods, systems and processes, whether now known
or hereafter devised, recognized or contemplated (including
interactive, CD-ROM, TV series, live stage and publishing), and
in all sizes and gauges of film tape and other material now known
or hereafter developed, and to print, reprint, publish, copy and
vend the Eclipse Pictures in any and all languages, in any form
or media and in any style or manner Westar may desire; and to
license others to exercise any or all of the rights, powers and
privileges of Westar under this Agreement. Said rights shall
hereinafter collectively defined as the "Rights". The Rights
include all rights of any nature whether now known or hereafter
conceived and the licenses or privileges, under copyright or
otherwise to: (1) license the Eclipse Pictures in any and all
media, whether now known or hereafter devised, including, but not
limited to, cinematic rights (theatrical, non-theatrical and
public video), video rights (including free, pay, cable,
satellite and broadcast); (2) the license of all music and lyrics
synchronized with or written for or only in connection with the
Eclipse Pictures; (3) the right to assign, license, sub-license
or otherwise delegate any or all of the aforesaid, in accordance
with the terms herein thereof; and (4) the right, but not the
obligation, to maintain, protect and defend copyright of the
Eclipse Pictures and/or any similar protection which may be
available in the Territory but only on behalf of Eclipse.
Further, Westar shall have the right to register the entire
copyright in the Eclipse Pictures in any name as herein provided
in any jurisdiction in the Territory which permits or requires
registration or copyrights as a condition to obtain any remedies
for copyright infringement, to give constructive notice of
copyright ownership, or for other purposes. It is specifically
understood that the copyright in the Eclipse Pictures shall
remain with Eclipse.
Delivery of the Eclipse Pictures: Delivery of the Eclipse
Pictures to Westar ("Delivery") at Eclipse's sole expense except
as otherwise provided herein, is the essence of this Agreement.
Delivery of each Eclipse Picture shall be as soon as practical
for Eclipse. Westar reserves the right to check the quality of
all materials delivered hereunder at a laboratory of its choice.
All materials must pass laboratory inspection and must be
satisfactory for the manufacture of first class quality release
copies of each Eclipse Picture. Should Eclipse not complete
Delivery, any costs that Westar may incur in doing so may be
deducted from payments otherwise due to Eclipse hereunder.
Should Westar, its licensees or sub-distributors require any
Delivery materials which have not otherwise been provided by
Eclipse, Westar may in its discretion, but without obligation
therefor, arrange to have such Delivery materials made, and shall
deduct the cost thereof from payment otherwise due to Eclipse
hereunder.
Territory: The Territory ("Territory") for this Agreement shall
be the Universe. Territory shall be deemed to include, but not
be limited to all of the possessions and territories of the
countries and nations in the World including, but not limited to,
all armed service installations, embassies and ships at sea
wherever located, and oil platforms flying flags of any of such
nations or countries. The Territory shall include, but not be
limited to, all rights to use the Eclipse Pictures in or on any
airplane, airline or other transportation facilities which may be
flying the flag of any country or nation
Term: The Initial Term of this Distribution Agreement shall
commence on the execution of hereof and continue for five (5)
years. After expiration of the Initial Term, this Distribution
Agreement shall continue from year to year unless cancelled by
either party on sixty (60) days written notice. No license to a
third party shall be granted longer than ten years without
Eclipse's prior written consent.
Sales Policies: Westar shall use its good faith professional
business efforts in the exploitation of the Eclipse Pictures
pursuant hereto, Eclipse agrees that Westar and any sub-
distributors or licensees of Westar shall have complete authority
to distribute the Eclipse Pictures and to exercise the rights
granted herein in accordance with such sales methods, policies
and terms as they may, in their good faith discretion, determine.
Except as provided herein, Westar and such sub-distributors shall
have the broadest possible latitude in the distribution of the
Eclipse Pictures and the exercise of their judgement in all
matters pertaining thereto shall be final. Westar has not made
any express or implied representation, warranty, guarantee or
agreement as to the amount of Gross Receipts which will be
derived from the distribution of the Eclipse Pictures, nor has
Westar made any express or implied representation, warranty,
guarantee or agreement that there will be any sums payable to
Eclipse hereunder or that the Eclipse Pictures will be favorably
received by the exhibitors or by the public or will be
distributed continuously. In no event shall Westar incur any
liability to Eclipse hereunder based upon any claim by Eclipse
that Westar has failed to realize receipts or revenues which
should or could have been realized. Eclipse acknowledges that
Westar may simultaneously with the distribution of the Eclipse
Pictures distribute pictures produced and co-produced by it, or
others, or both, in competition with the Eclipse Pictures, and
Westar shall be under no duty to secure for the Eclipse Pictures
as favorable prices and terms as it secures for films produced by
it, by others or both, it being understood that without in any
way limiting the latitude or discretion of Westar or its
licensees hereunder, Westar agrees to use good faith criteria in
establishing the prices and terms for the Eclipse Pictures.
Wherever a licensee pays either a flat sum or percentage of the
receipts, or both, or makes other payments for the right to
exhibit a group of pictures under an agreement, Westar will
specify under separate contract what portion of the license
payments apply to the respective pictures in the group, and said
allocation shall be fair and equitable to Eclipse but shall in no
way be less that the scheduled minimum for that Territory.
Distribution Fees: Westar's distribution fees ("Distribution
Fee") with respect to the Gross Receipts (as defined below) from
the Rights of the Eclipse Pictures shall be Fifty Percent (50%)
of the Gross Receipts from the exploitation of the Rights in the
Territory. Westar shall remit the balance of Gross Receipts,
after deducting and retaining Distribution Fees, to Eclipse.
Gross Receipts: As used herein, the term "Gross Receipts" shall
mean the aggregate of all monies actually received (and not
subject to forfeiture or return) by Westar from its licensees or
sub-distributors from the sale, licensing, marketing and
exploitation of the Eclipse Pictures and any use of the Rights in
the Territory.
Distribution Expenses: The term "Distribution Expenses" shall
include, but not be limited to, expenses incurred with respect to
trailers, art work, promotional materials, delivery materials,
advertising, and any and all expenses incurred by Westar for the
sales, marketing and distribution of the Eclipse Pictures, the
exploitation of the Rights, and reasonable attorney's fees and
costs for any third party claims or causes of action related to
the Eclipse Pictures. All Distribution Expenses incurred by
Westar shall be paid to, or reimbursed to, Westar by Eclipse as
and when incurred by Westar.
Editing, Resetting and Foreign Versions: Westar may make or
cause to be made and/or authorize others to make English-language
and foreign-language versions of the Eclipse Pictures, whether
dubbed versions, superimposed versions or otherwise, all with
prior consultation with Eclipse. Eclipse will pay Westar for
same as a Distribution Expense if not paid by the territorial
distributor. Westar may also grant to any other persons, firms,
corporation or entities the right to make foreign-language
versions in the Territory during the Term. Westar, with the
prior written consent of Eclipse, may change the title of any
Eclipse Pictures in connection with its distribution in all or
any part of the Territory if, in the judgement of Westar, it is
desirable or expedient to do so.
Music Synchronization License Rights: Eclipse hereby licenses
to Westar for the Term and Territory the synchronization rights
in the Eclipse Pictures, only to be used in connection with the
distribution or exploitation of the Eclipse Pictures in all media
throughout the World. All other music rights including
performance rights are held by Eclipse.
Westar's Credit: Westar and its designees shall receive the
following credits with respect to the exploitation of the Eclipse
Pictures:
A. On-Screen Credit:
(i) A first card, single card, front end message presentation
credit on the screen, consisting of Westar's optical logo and
types credit reading "Westar Entertainment Presents" in a size
equal to the regular title, followed by Eclipse credits.
B. Credit in Paid Advertising:
(i) "Westar Entertainment Presents" above or preceding the
regular title in first position, along with the Westar logo.
Execution of Documents: Eclipse and Westar shall execute and
deliver any and all documents which may be necessary or
appropriate to fully implement the provisions of this
Distribution Agreement.
Eclipse's Warranties: Eclipse specifically represents and
warrants that (i) Eclipse has the full authority to grant the
Rights granted to Westar herein; (ii) that the Rights are and
will be free and clear of any liens, encumbrances, restrictions,
claims or rights inconsistent with or which could adversely
affect any of the Rights granted herein to Westar, and the
Eclipse Pictures as delivered will be free from any outstanding
payable of any kind; (iii) that the grant of the Rights to Westar
does not interfere with or infringe on the rights of any third
party; (iv) that all rights to music, story, name, likeness,
pictures caricatures, dialogue, voice-overs, the literary
material upon which the Eclipse Pictures are based and to any
other material of any nature whatsoever appearing, used or
recorded in the Eclipse Pictures have been and will be obtained
in proper form for the free and unrestricted use and exploitation
of the Eclipse Pictures in the Territory; (v) that Eclipse has
and will have the right to issue and authorize publicity
concerning persons appearing in or rendering services in
connection with the Eclipse Pictures or appearing in the paid
advertising of the billing, and has and will have the right to
use, reproduce, transmit, broadcast , exploit, publicize and
exhibit their names, photographs, likeness, voices and other
sound effects, as well as recording, transcriptions, films and
other reproductions thereof in connection with the Rights granted
herein to Westar; (vi)that there are and will be no restrictions
from Eclipse or third parties of any kind which could or would
prevent, limit or impair Westar's sole and exclusive Rights or
its right to any use or exploitation thereof; (vii) except as
provided herein Westar will not be obligated to make any payments
to anyone other than as expressly specified in this Distribution
Agreement in connection with the exercise by Westar, its
licensees or sub-distributors of any license rights granted,
including but not limited to, any guild, rerun, reuse, pension,
deferment or residual payments of any kind, nature or
description; (viii) that no third party is entitled to share
Gross Receipts of the Eclipse Pictures in any way which would
limit Westar's Distribution Fee as provided for herein; (ix) that
none of the Eclipse Pictures have been or will be released,
distributed or exhibited by any means or media whatsoever in any
part of the Territory, nor banned by censors of, or refused
import permits for any part of the Territory; (x) Eclipse has not
and will not exercise any right in the Eclipse Pictures which
might tend to derogate from or compete with the Rights herein
granted to Westar; (xi) Westar will quietly and peacefully enjoy
and possess all Rights without hindrance on the part of any
person, firm, corporation or entity,; and (xii) Eclipse further
represents and warrants that none of the Eclipse Pictures, nor
any materials contained therein or synchronized therewith, nor
the exercise of any rights or license t herein, will defame or
constitute unfair competition with any third party, violates or
will violate, infringes or will infringe, any trademark, trade
name, copyright or civil property, right of privacy, right of
publicity or "moral right of authors", or any law or regulation
or other right whatsoever of, or slanders or libels, any person,
firm, corporation, association or entity whatsoever. Westar
warrants that it will not make any changes in the Eclipse
Pictures or perform any act that would subject Westar to any
Liability whatsoever.
Infringements and Collection Suits: Westar may, in the name of
Eclipse, or otherwise, take such steps as Westar may deem
reasonably necessary or appropriate by action-at-law or otherwise
to prevent unauthorized exhibition or distribution of the Eclipse
Pictures or any infringement upon the rights of Eclipse or Westar
under this Distribution Agreement, and Westar or its nominee may,
as Eclipse's attorney-in-fact, execute, acknowledge, verify and
deliver all instruments pertaining thereto in the name of and on
behalf of Eclipse only in respect to infringement and collection
suits. Westar may also take such steps as Westar shall deem
necessary or appropriate by action-at-law or otherwise to recover
moneys due pursuant to any agreement relating to the exploitation
of the Rights. All costs and expenses, including reasonable
attorneys fees, in connection with such matters shall be borne by
Westar but shall be recoupable by Westar from Eclipse.
Offset Rights: In the event any written claim or lawsuit is
instituted against Westar or any licensee or sub-distributor of
Westar, which written claim or lawsuit (the "Liability") on a
claim inconsistent with any of Eclipse's warranties,
representations or agreements hereunder, Westar may offset any
moneys that Westar reasonably deem necessary, now or hereafter
payable to or for the account of Eclipse, in the amount of the
Liability plus Westars reasonable attorney's fees and costs,
whether or not the Liability has been reduced to judgement. In
addition, pending the final determination of such Liability,
Westar may withhold from such moneys payable to Eclipse hereunder
such amount as Westar may reasonably deem necessary to cover the
Liability plus Westar's reasonable attorney's fees and costs.
Westar may compromise or settle such Liability upon terms as
Westar may deem reasonable.
Indemnity:
A. Each party (in this capacity referred to as "Indemnitor")
agrees to indemnify and hold the other party (in this capacity
referred to as "Indemnitee") and its successors in interest.
licensees and assigns, the officers, directors agents,
shareholders, attorneys, and employees of the foregoing (in this
capacity referred to as "Indemnities") harmless from and against
and all costs, claims, charges, recoveries, losses, expenses
(including, but not limited tom reasonable attorney's fees),
liabilities, judgements, settlements, compromises or any other
out-of-pocket loss (hereinafter collectively referred to as a
"Loss") which may be made, asserted, maintained, secured, against
or suffered by Indemnities, or any of them caused by any breach
or alleged breach by Indemnitor of any provision of this
Distribution Agreement.
B. Each party agrees to give the other party timely written
notice of any claim, demand or action which is or may be subject
to this Paragraph including A or B hereof ("Demand") promptly
after obtaining knowledge thereof and shall make available to the
other party all documents and information in possession of that
party material the Demand. Within ten (10) days from receipt of
such notice, the applicable Indemnitor agrees to assume the
defense of the demand on behalf of itself and the applicable
Indemnities. Any Indemnitee shall have the right to participate
in the defense of any Demand through counsel of their choice at
their cost, if the applicable Indemnitor fails to promptly assume
the defense of any reasonable Demand, any Indemnitee may do so
and the applicable Indemnitor shall promptly reimburse all
Indemnitees for all costs, expenses (including, but not limited
to, reasonable attorney's fees) incurred in connection therewith
as such are incurred. Indemnitees shall not settle or compromise
any Demand without prior written consent of any Indemnitor,
unless that Indemnitor shall fail or refuse for any reason to
reimburse costs and expenses withheld. Both parties agree to
fully cooperate with the other in the defense of all Demands
initially made by third parties, including but not limited to,
prompt compliance with all reasonable discovery requests.
Assignment, Successors: Both parties may assign this
Distribution Agreement provided that such assignment does not
release the assignor from assigner's responsibilities hereunder
and provided that the other party is advised of such assignment
before it is effected. This Distribution Agreement shall inure
to the benefit of and be binding upon the heirs, executors,
administrators, assignees and successors in interest of the
parties hereto.
Applicable Law: This Agreement shall be construed, interpreted
and enforced in accordance to the laws of the State of California
applicable to agreements executed and to be wholly performed
within such state and without regard to the conflict or choice of
law provisions thereof. All proceedings commenced to enforce
this Agreement shall be decided before a sole arbitrator in the
County of Los Angeles, State of California before the American
Film Association Arbitration Tribunal in accordance with AFMA
rules and procedures.
Partial Invalidity: If any provisions of this Distribution
Agreement is held invalid or unenforceable by any court of final
jurisdiction, it is the intent of the parties that such provision
shall be ineffective only to the extent of such prohibition or
invalidity and that all other provisions of this Distribution
Agreement shall be construed to remain fully valid, enforceable
and binding on the parties.
Interpretation: Wherever any words are used herein in a gender
they shall also be construes as though they were in the opposite
gender in all cases where they would apply and wherever any words
are used herein the singular form they shall be construed as
though they were also used in the plural form in all cases where
they would so apply.
Relationship of Parties: The relationship between Eclipse and
Westar is that of creditor and debtor with respect to sums due
pursuant to this Agreement. Nothing contained herein shall be
construed so as to create a joint venture or partnership between
Eclipse and Westar. Except as otherwise specifically set forth
herein, neither Eclipse nor Westar shall be authorized or
empowered to make any representation or commitment or to perform
any act which shall be binding on the other party unless
expressly authorized or empowered in writing.
Headings: The descriptive headings of the paragraphs of this
Agreement are inserted solely for convenience of reference and
are not part of this Agreement and are not intended to govern,
limit, amplify or aid in the construction of any of the terms or
provisions of this Agreement.
Counterparts: This Agreement may be signed in one or more
counterparts, each of which shell be deemed an original, but all
of which shall constitute one and the same instrument. The
respective signatures on each of such counterparts shall
constitute a binding agreement by and between the parties.
Notices: All notices, payments or approvals which either party
is required or may desire to give or to serve upon the other
party under this Distribution Agreement shall be in writing and
may be delivered personally, by facsimile transmission, by
overnight courier services or by registered or certified mail,
return receipt requested, prepaid first class mail to the said
party at the address set forth below or such other address of
which it may hereafter give notice to the other party in writing.
A copy of any notice sent by facsimile transmission must also be
sent by regular mail. Any notice sent by facsimile transmission
shall be deemed served the same day if it is a business day
during normal business hours of the recipient or the next
business day is received after recipient's normal business hours
or on a Saturday, Sunday or legal holiday. Any notice sent by
overnight courier service shall be deemed served the next
business day. Any notice sent by certified or registered prepaid
first class mail shall be deemed served seven (7) days after it
shall be deposited with the Canadian or United States Postal
Service.
Notices to Producer: Eclipse Entertainment Group, Inc.
10900 N.E. 8th Street, Suite 900
Bellevue, WA 98004
Tel: (425) 990-5969 Fax: (425) 990-5979
Notices to Westar: Westar Entertainment, Inc.
1732 S. Sepulveda Boulevard
Los Angeles, CA 90025
Tel: (310)477-4144 Fax: (310)477-6690
Accounting: Westar shall furnish Eclipse with detailed and
itemized reports quarterly, said reports to indicate Gross
Receipts, Distribution Fees and Distribution Expenses, and shall
be accompanied by Eclipse's Share of Gross Receipts shown to be
due. Any objection to a report shall be made in writing within
six (6) months of the rendering of same and if no objection has
been made said report shall be deemed final and any objection
thereto deemed waived and action thereon barred.
Entire Agreement: This Distribution Agreement constitutes the
complete and entire agreement and understanding between the
parties pertaining to the subject matter contained herein and
supercedes all prior and contemporaneous agreements,
representation and understandings, whether oral or written, of
the parties. No supplement, modification or amendment of this
Distribution Agreement shall be binding unless executed in
writing by all parties. Eclipse and Westar shall execute any and
all documents and instruments and shall do all acts which may be
necessary or appropriate to fully implement the provisions of
this Distribution Agreement.
Arbitration: Any controversy, dispute or claim arising out of
the interpretation, performance, breach or alleged breach of this
Distribution Agreement, shall be resolved by binging arbitration,
before a sole arbitrator, at the request of either party, in
accordance with the rules of the American Film Marketing
Association. The arbitrator shall apply California substantive
law and the California Evidence Code to the Proceedings. The
arbitrator shall have the power to grant all legal and equitable
remedies and award compensatory damages provided by California
law, including the power to award punitive damages in the event
of gross misconduct or fraud, that Eclipse may not enjoin the
distribution of any Eclipse Picture for any reason and shall be
limited to its damages at law for any claims arising under or in
connection with this Distribution Agreement. The arbitrator
shall prepare in writing and provide to the parties an award
including factual findings and the errors of law or legal
reasoning, and the award may be vacated or corrected pursuant to
California Code of Civil Procedure Sections 1286.2 or 1286.6 for
any such error. All such proceedings shall take place in the
County of Los Angeles, State of California.
Default and Cure: Neither party shall be liable for its breach
of the terms of this Distribution Agreement unless it shall have
received written notice of such breach from the non-breaching
party and the breaching party shall not within fifteen (15) days
after receipt of such notice have cured said breach. Such cure
right shall not be applicable to breaches which are incapable of
being cured. In the event Westar or Eclipse materially breaches
this Distribution Agreement and does not cure said breach in
accordance with the terms hereof, Westar or Eclipse may elect to
terminate this Distribution Agreement and all of its obligations
hereunder, it being understood that the exercise by Westar or
Eclipse of its rights or remedies under any one provision of this
Distribution Agreement shall not limit or affect its rights or
remedies concurrently or subsequently to exercise any other right
or remedy and shall be in addition to such other rights or
remedies as Westar or Eclipse may have at law, in equity, under
this Distribution Agreement or otherwise. All of Westar's and
Eclipse's rights and remedies under this Distribution Agreement
shall be cumulative.
No Waiver: No waiver of any of the provisions of this
Distribution Agreement shall be deemed, or shall constitute a
waiver of any other provision, whether or not similar, dissimilar
or identical, nor shall any waiver constitute a continuing
waiver. Nether party shall be deemed to have waived any
provision hereof except in writing signed by the party to be
charged.
Construction: This Distribution Agreement has been negotiated
and approved by the parties hereto and notwithstanding any rule
or maxim of construction to the contrary, any ambiguity or
uncertainty in this Agreement shall not be construed against
either party based upon authorship of any of the provisions
hereof.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date first written above.
ECLIPSE ENTERTAINMENT GROUP, INC
By: /s/ Arthur Birzneck
Arthur Birzneck, President
Date: January 1, 1998
WESTAR ENTERTAINMENT GROUP, INC.
By: /s/ Franco Colombu
Franco Columbu, President
Date: January 1, 1998
