Exhibit 7.3
DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into and made effective as of January 18, 2000 by and
between WOW Entertainment, Inc. of 6358 College Avenue, Indianapolis, Indiana
46220 ("Owner") and M/G Perin, Inc. of 21 East 40th Street, Suite 1601, New
York, New York 10016 ("Distributor").
RECITALS
A. Owner owns all distribution rights in and to the television program
currently entitled "Women of Wrestling" (the "Program").
B. Owner desires Distributor to represent, sell, distribute and market the
Program throughout the licensed Territory (hereinafter defined), and Distributor
desires to so represent, sell, distribute and market the Program.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Owner and Distributor have agreed
as follows:
1. Programming. Subject to Owner's election to proceed with the production
of the Program, and provided this Agreement has not been previously terminated
by Owner agrees to produce and deliver to Distributor, and Distributor agrees to
distribute, forty-eight (48) original one (1) hour episodes plus four (4) one
(1) hour "best of" compilation episodes of the Program (the "First Season") for
free, over-the-air, terrestrial broadcast television distribution ("Free
Television") commencing with the 2000/01 broadcast season. Each one (1) hour
episode of the Program shall be formatted to contain approximately fourteen and
one-half (14-1/2) minutes of commercial content. Owner shall also produce and
deliver to Distributor one demo tape (which Distributor acknowledges has been
received and approved), one custom promo for each station as necessary, and
weekly episodic promos advertising the upcoming week's telecast. Owner shall be
solely responsible for the financing and production of the Program, demo tape
and promo tapes. Notwithstanding the foregoing, Distributor will make available
to Owner its ability to finance advertising time sales receivables, provided
that the cost of such financing, and any required modifications to the terms
regulating the disbursement of funds from the "lockbox" described in Paragraph 7
below, shall be negotiated by Owner and Distributor in good faith. The episodic
budget for the First Season of the Program is currently anticipated to be
approximately $205,000 per episode; however, Owner shall have the right to
increase or decrease the budget in its sole discretion provided that the quality
and technical standards of the episodes are maintained at the level required for
national U.S. syndication television distribution. The content of each episode
shall contain no material likely to be deemed offensive by the primary target
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audience of the Program, judged by contemporary standards of other wrestling
programming on U.S. broadcast television.
2. Initial Sales Effort; Distribution Fee Advance; Marketing Expenses.
(a) Distributor shall proceed to diligently market and sell the Program
for Free Television exhibition in the United States during the 2000/2001
broadcast season, including, without limitation, marketing and selling the
Program at NATPE 2000. Commencing in January, 2000 (with the first payment due
at the later of (i) February 1, 2000; or (ii) within five (5) days of the date
of execution of this Agreement) and continuing on a monthly basis thereafter,
Owner shall pay Distributor $20,000 per month (the "Distribution Fee Advance"),
for a total of no more than twelve (12) months (i.e., a total of no more than
$240,000), as an advance against Distributor's distribution fee from the
distribution of the Program. The aggregate Distribution Fee Advance paid by
Owner to Distributor shall be recoupable and paid to Owner (with interest
thereon) from the first revenues received by Distributor from the distribution
of the Program (i.e., prior to Distributor's receipt of any distribution fees).
Owner contemplates receiving an initial financing commitment of approximately
$300,000 for the production of the Program. Owner shall not be required to make
more than three (3) Distribution Fee Advance payments to Distributor (i.e., a
total of $60,000) prior to Owner's securing further financing commitment(s) and
actually receiving payments totaling at least $6 million for the production of
the Program. Further, if it becomes reasonably apparent to Owner prior to the
payment of the second Distribution Fee Advance (due at the later of (i) March 1,
2000; or (ii) within five (5) days of the date of execution of this Agreement)
or, if such amount is paid, prior to the payment of the third Distribution Fee
Advance (due at the later of (i) April 1, 2000; or (ii) within five (5) days of
the date of execution of this Agreement) that Owner will or may be unable to
secure sufficient financing to proceed with the production of the Program, Owner
shall have the right not to make any further Distribution Fee Advance payments
to Distributor unless and until such additional financing is secured. In such
event, Distributor shall have the right, upon seven (7) days prior written
notice to Owner, to discontinue rendering any further services hereunder until
such time, if ever, as Owner has paid to Distributor all Distribution Fee
Advance payments accrued and unpaid to Distributor as of the date of
Distributor's notice. If Distributor continues rendering services hereunder,
Owner shall pay all accrued and unpaid Distribution Fee Advances to Distributor
promptly upon obtaining sufficient financing to proceed with the production of
the Program (but in no event shall Owner have any obligation to make any
additional payments to Distributor in the event such financing is not obtained).
(b) In addition to the foregoing, Owner shall reimburse Distributor for
all actual, direct, out-of-pocket, third-party, bona fide, mutually-approved
expenses actually paid by Distributor directly related to the marketing and
sales of the Program (including dubs, station mailings, satellite fees, research
costs, and local and national Nielsen
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ratings), but specifically excluding any costs associated with Distributor's
overhead or any other indirect selling costs paid or incurred by Distributor
(including, without limitation, meals, gifts, client entertaining, airfares, car
rentals, other travel costs, office phone calls, faxes, cell phones, paper
clips, copies of contracts, etc.). All marketing and sales expenses to be
reimbursed to Distributor by Owner hereunder shall be approved in writing in
advance by Owner, which approval shall not be unreasonably withheld. Owner and
Distributor shall promptly prepare and approve an itemized marketing and sales
budget detailing all of the marketing and sales expenses to be incurred in
connection with the Program. Such marketing and sales budget shall include
so-called "station comp" of approximately $1,500,000, which Distributor shall
have the right to use on an as-needed basis subject to Owner's prior written
approval in each instance. Distributor shall provide Owner with copies of all
station contracts and Owner shall pay any such "station comp" (if approved by
Owner) directly to the applicable station on behalf of Distributor.
3. Early Termination Option. In the event Distributor has not secured U.S.
market clearances satisfactory to Owner for the 2000/2001 broadcast season on or
before May 1, 2000, then Owner shall have the right, at its sole election, to
terminate this Agreement. For purposes of this provision, Distributor will be
deemed to have secured market clearances satisfactory to Owner if it has cleared
the Program on stations in at least four (4) of the top five (5) U.S. television
markets, eight (8) of the top ten (10) U.S. television markets, and sixteen (16)
of the top twenty (20) U.S. television markets (or, in lieu of the requirement
of 16 of the top 20 U.S. television markets, in at least 72% of U.S. television
households) (the "Minimum Clearance"). It is understood and agreed that Owner
has waived the foregoing Minimum Clearance requirement as a basis for early
termination of this Agreement pursuant to this paragraph; provided, however,
that such waiver shall not be deemed a waiver of any other provision hereunder
nor shall it affect any of Owner's other rights hereunder. In the event Owner
elects to terminate this Agreement pursuant to this paragraph, then neither
Owner nor Distributor shall have any further obligations to the other hereunder,
and Owner may elect not to proceed with the production of the Program or to
proceed with the production of the Program and engage a different distributor,
as determined by Owner in its sole discretion. Notwithstanding the foregoing,
Owner shall not have the right to engage any other distributor to distribute the
Program for Free Television exhibition in the United States for the 2000/2001
broadcast season. In addition, if Owner elects to engage a different distributor
to distribute the Program for Free Television exhibition in the United States
subsequent to the 2000/2001 broadcast season, Owner shall pay to Distributor,
within thirty (30) days following Owner's entering into a distribution agreement
with the other distributor, any and all Distribution Fee Advances accrued and
unpaid to Distributor as of the date of termination, as well as the actual,
direct, out-of-pocket, third-party, bona fide expenses actually paid by
Distributor in connection with the marketing and sales of the Program at NATPE
2000 (not to exceed $15,000).
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4. Grant of Rights.
(a) Subject to Owner's election to proceed with the production of the
Program, and provided this Agreement has not been previously terminated by
either party, Owner hereby grants Distributor the sole and exclusive right and
license to distribute, sell, license, lease, rent, subdistribute and otherwise
market the Program throughout the United States, its territories and possessions
(the "Domestic Territory") by means of Free Television for a term of seven (7)
years following the initial telecast of the last episode produced for the last
season for which Distributor distributes original episodes of the Program
hereunder (unless earlier terminated pursuant hereto) (the "Term"). (For the
sake of clarity, if Distributor distributes more than one season of original
episodes of the Program, the 7-year period will not begin to run until the
initial telecast of the last episode produced for the last season of original
programs.) In addition, if the Program is cleared in accordance with the Minimum
Clearance requirements prescribed in Paragraph 3 above, then subject to Owner's
election to proceed with the production of the Program and provided this
Agreement has not been previously terminated by Owner, Owner will grant
Distributor the sole and exclusive right and license to distribute, sell,
license, lease, rent, subdistribute and otherwise market the Program throughout
the rest of the world outside the Domestic Territory (the "Foreign Territory")
by means of Free Television, basic cable and pay cable television, and satellite
(but not pay-per-view) for the duration of the Term. The Domestic Territory and
the Foreign Territory (if applicable) may be referred to herein collectively as
the "Territory." Further, if Distributor actually secures Free Television
distribution of the First Season of the Program in the Domestic Territory and
Owner has not terminated this Agreement for any reason set forth herein, then
Owner will grant to Distributor all basic cable second-run television
syndication rights ("Basic Cable") in the Domestic Territory for the First
Season of the Program (and each subsequent season of the Program, if any, for
which Distributor actually secures Free Television distribution of the Program
in the Domestic Territory) for the duration of the Term. Subject to the
foregoing, Owner reserves all other rights of every kind and nature in and to
the Program in any and all media now known or hereafter devised, including,
without limitation, all basic cable, pay cable, pay-per-view, satellite and all
other television rights; home video rights; live performance rights; theme park
and location-based entertainment rights; internet rights; spinoff, sequel and
remake rights; theatrical rights; interactive media rights; merchandising,
licensing and print publication rights; and soundtrack and music publishing
rights.
(b) It is understood and agreed that Owner may create and distribute (or
enter into agreements for the creation and/or distribution of) new programming
similar to or related to the Program, including, without limitation, additional
wrestling programs or programs featuring the announcers, wrestlers or others
featured in the Program, which may be live action or animated (collectively,
"New Programming"), and that any such New Programming shall not be deemed to be
a Program for purposes of this Agreement and Distributor shall have no rights of
any kind in connection therewith. Owner's ability
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to create and distribute (or enter into agreements for the creation and/or
distribution of) New Programming shall be subject only to the exclusivity
requirements of Distributor's standard form license agreement (a copy of which
is attached hereto as Exhibit "A"). Notwithstanding the foregoing, provided this
Agreement has not been previously terminated and remains in full force and
effect, Owner agrees not to distribute (or enter into an agreement for the
distribution of) New Programming on any form of television in the Domestic
Territory until the commencement of the second broadcast season of the Program.
In addition, provided this Agreement has not been previously terminated and
remains in full force and effect, then if Owner desires to distribute (or enter
into an agreement for the distribution of) New Programming in the form of a
television "spinoff" (as customarily defined in the U.S. television industry) of
the Program or any other television program which is confusingly similar to the
Program, Owner's ability to do so shall be subject to Distributor's approval,
which shall not be unreasonably withheld, and the parties shall negotiate in
good faith consistent with customary industry practices a passive fee to be paid
to Distributor in connection with such New Programming.
5. Ad Sales. Owner shall have a right of reasonable approval over the ad
sales company (and any replacements thereof) and the general ad sales strategy
and position (including, without limitation, target sales rate and general
selection of sponsors and advertisers). Owner shall have an absolute right to
disapprove any sponsor or advertiser which Owner in good faith determines will
have a detrimental impact on the image of the Program Owner desires to present
to the general public.
6. Distribution Fees, Expenses and Other Consideration. After recoupment by
Owner of all Distribution Fee Advance payments paid by Owner to Distributor
hereunder (plus interest thereon at the rate of prime plus one percent (1%)),
Distributor shall be entitled to charge the following distribution fees:
(a) 35% of all gross domestic revenues derived from advertising time
sales or cash sales for Free Television distribution, (based solely on
commercial advertising units sold within a commercial broadcast) which fee shall
be fully inclusive of all third-party ad sales commissions or other fees or
costs and fully inclusive of Distributor's overhead and any non-budgeted and/or
unapproved distribution expenses or other indirect selling costs paid or
incurred by Distributor;
(b) if Distributor is granted Basic Cable distribution rights in the
Program in the Domestic Territory, 25% of all gross domestic revenues derived
from Basic Cable distribution, which fee shall be fully inclusive of
Distributor's overhead and any non-budgeted and/or unapproved distribution
expenses or other indirect selling costs paid or incurred by Distributor; and
(c) if Distributor is granted television distribution rights in the
Program in the Foreign Territory, 30% of all gross foreign revenues (capped at
an overall total of 35% if
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a third-party subdistributor is engaged), which fee shall be fully inclusive of
Distributor's overhead and any other indirect selling costs paid or incurred by
Distributor (but not Distributor's distribution expenses from the Foreign
Territory, subject to Paragraph 7(c) below).
If the common stock of Owner or the common stock of a company that owns
eighty percent (80%) or more of the common stock of Owner becomes or is publicly
traded on one or more of the following: i) the "pink sheets" by the National
Quotation Bureau, Inc.; ii) the over-the-counter market on the electronic
bulletin board; iii) on NASDAQ or iv) on any national securities exchange or
quotation system, Owner: 1) shall promptly issue three percent (3%) of its
outstanding common shares to Distributor (if Owner's common shares become
publicly traded), or shall cause its parent company to promptly issue to
Distributor the number of its common shares that is equal to three percent (3%)
of the common shares owned by David McLane, John Fisbeck and Carter Fortune (if
Owner's parent company's shares become or are publicly traded); and 2) shall
promptly issue a warrant to purchase an additional one percent (1%) of its
outstanding common shares to Distributor (if Owner's common shares become
publicly traded), or shall cause its parent company to promptly issue a warrant
to Distributor so that Distributor may purchase the number of additional common
shares that is equal to one percent (1%) of the common shares owned by David
McLane, John Fisbeck and Carter Fortune (if Owner's parent company's shares
become or are publicly traded). The warrant shall be issued at an exercise price
of one million dollars ($1,000,000) in total with an exercise date prior to the
date that is five (5) years from the date that Owner or Owner's parent company
initially issues its common stock to Distributor. The number of common shares
subject to the warrant and the option price per share shall be determined as of
the date that Owner or Owner's parent company initially issued its common stock
to Distributor. If, however, Owner or Owner's parent company shall at any time
effect a recapitalization, reclassification or other similar transaction of such
character that the shares of common stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of common stock which Distributor shall be
entitled to purchase upon exercise of the warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of common stock by reason of such recapitalization,
reclassification or similar transaction, and the exercise price per share shall
be, in the case of an increase in the number of shares, proportionally decreased
and, in the case of decrease in the number of shares, proportionally increased.
Distributor, at its option, may designate that some or all of the shares may be
issued directly to its principal owner, Richard Perin.
If the common stock of a company that owns less than eighty percent
(80%) of the common stock of Owner becomes or is publicly traded on one or more
the following: i) the "pink sheets" by the National Quotation Bureau, Inc.; ii)
the over-the-counter market on the electronic bulletin board; iii) on NASDAQ or
iv) on any national securities
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exchange or quotation system and Distributor elects to void Section 8 of this
Agreement, Owner: 1) shall cause its parent company to promptly issue to
Distributor the number of its common shares that is equal to three percent (3%)
of the common shares owned by David McLane, John Fisbeck and Carter Fortune; and
2) shall cause its parent company to promptly issue a warrant to Distributor so
that Distributor may purchase the number of additional common shares that is
equal to one percent (1%) of the common shares owned by David McLane, John
Fisbeck and Carter Fortune. The warrant shall be issued at an exercise price of
one million dollars ($1,000,000.00) or on a substantial equivalent economic
basis as described above in the proceeding paragraph in total with an exercise
date prior to the date that is five (5) years from the date that Owner's parent
company initially issued the common stock to Distributor. The number of common
shares subject to the warrant and the option price per share shall be determined
as of the date that Owner's parent company initially issued its common stock to
Distributor. If, however, Owner's parent company shall at any time effect a
recapitalization, reclassification or other similar transaction of such
character that the shares of common stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of common stock which Distributor shall be
entitled to purchase upon exercise of the warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of common stock by reason of such recapitalization,
reclassification or similar transaction, and the exercise price per share shall
be, in the case of an increase in the number of shares, proportionally decreased
and, in the case of decrease in the number of shares, proportionally increased.
7. Distribution Contracts and Proceeds; Lockbox. Distributor shall promptly
provide Owner with fully-executed copies of all of Distributor's station
contracts, ad sales contracts and other contracts for the distribution of the
Program. All such contracts will require that all gross amounts payable
thereunder shall be paid directly into a specific lockbox for the benefit of
Owner and Distributor. All amounts paid into the lockbox will be immediately
distributed and applied as follows:
(a) first, to payment of any actual, direct, out-of-pocket, third-party,
bona fide, mutually-approved distribution expenses (specifically excluding any
costs associated with Distributor's overhead or any other indirect selling costs
paid or incurred by Distributor) actually paid by Distributor and not previously
recouped by Distributor or reimbursed by Owner; provided, however, that if
Distributor is granted television distribution rights in the Program in the
Foreign Territory, Distributor's recoupable distribution expenses from the
Foreign Territory shall not exceed five percent (5%) of gross foreign revenues,
provided that materials costs (i.e., dubbing, PALs, shipping, etc.) shall not be
subject to such cap;
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(b) second, to recoupment by Owner of all Distribution Fee Advance payments
paid by Owner hereunder with interest accruing from the date of payment thereof
at the rate of prime plus one percent (1%);
(c) third, to payment of Distributor's distribution fees as set forth in
Paragraph 6 above; and
(d) fourth, all remaining proceeds shall be paid to Owner.
The lockbox instructions will be prepared and mutually approved by Owner and
Distributor in good faith, taking into consideration, among other things, that
(depending upon the identity of the ad sales company) the ad sales commissions
may or may not be deducted prior to payment of the distribution proceeds into
the lockbox, and that the exact amount of distribution expenses recoupable by
Distributor at any one point in time may vary.
8. Ancillary Proceeds. Provided this Agreement has not been terminated for
any reason and Distributor is not in breach or default hereof, and provided
Owner elects to produce and Distributor distributes additional episodes of the
Program following the First Season, then commencing with the initial United
States telecast of the first episode of the second season of the Program and
continuing for the duration of the Term, Distributor shall be entitled to
receive from Owner a percentage of the Net Ancillary Revenues derived from the
exploitation of merchandising, licensing, print publication, soundtrack, music
publishing, pay-per-view, sponsorships, and internet rights in and to the
Program and the "Women of Wrestling" property. This percentage shall be equal to
fifteen percent (15%) times David McLane's percentage ownership of the common
stock of Owner. David McLane owns thirty-three and one-third percent (33 1/3%)
of Owner, so Distributor shall be entitled to five percent (5%) of the Net
Ancillary Revenues (.15 x .333). If the common stock of Owner or the common
stock of a company that owns eighty percent (80%) or more of the common stock of
Owner becomes or is publicly traded on one or more of the following: i) the
"pink sheets" by the National Quotation Bureau, Inc.; ii) the over-the-counter
market on the electronic bulletin board; iii) on NASDAQ or iv) on any national
securities exchange or quotation system, this Section shall immediately become
void and have no further force or effect (i.e. Owner shall have no further
obligation to pay any Net Ancillary Revenues to Distributor). If the common
stock of a company that owns less than eighty percent (80%) of the common stock
of Owner becomes or is publicly traded on one or more of the following: i) the
"pink sheets" by the National Quotation Bureau, Inc; ii) the over-the-counter
market on the electronic bulletin board; iii) on NASDAQ or iv) on any national
securities exchange or quotation, Distributor may, at its option, elect to have
this Section immediately become void and have no further force or effect (i.e.,
Owner shall have no further obligation to pay any Net Ancillary Revenues to
Distributor). For the purposes of this provision, "Net Ancillary Revenues" shall
be defined as revenues derived from the foregoing sources remaining
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after recoupment by the investors of their investment and a rate of return
thereon to be determined by Owner in Owner's good-faith discretion, and
deduction of any and all licensing fees, third-party participations, production
costs and all other costs and expenses incurred by Owner. Distributor's
percentage of Net Ancillary Revenues hereunder shall be payable to Distributor
by Owner within thirty (30) days of Owner's receipt of the applicable Net
Ancillary Revenues.
9. Subsequent Seasons. Provided (a) Owner has received all amounts due
hereunder and Distributor is not in breach or default hereof; (b) this Agreement
remains in full force and effect and has not been terminated for any reason set
forth herein; and (c) the Program is cleared in accordance with the Minimum
Clearance requirements prescribed in Paragraph 3 above, then if Owner elects (in
its sole discretion) to produce additional episodes of the Program for
subsequent production years following the First Season, Distributor shall be
locked and obligated to distribute such episodes on Free Television and Basic
Cable in the Domestic Territory and on all forms of television in the Foreign
Territory on the terms set forth herein (provided, however, that Owner shall not
be required to pay any Distribution Fee Advance payments to Distributor in
subsequent production years). Owner shall give Distributor written notice of its
intention to produce such additional episodes by the May 1 preceding the
proposed commencement of production of such episodes (e.g., Owner would be
required to give Distributor written notice of its intention to produce episodes
for a second season of the Program by May 1, 2001). In the event Owner is not
required (for any of the reasons set forth in items (a) through (c) above) and
elects not to offer Distributor the opportunity to distribute such additional
episodes, then neither Owner nor Distributor shall have any further obligations
to the other hereunder in connection with any subsequently produced episodes of
the Program.
10. Delivery of the Programs. Unless otherwise agreed in writing, Owner
shall use all reasonable, good-faith efforts to deliver each episode of the
Program to Distributor, or to such other entity mutually agreed by Owner and
Distributor, four (4) weeks in advance of the scheduled broadcast thereof.
Notwithstanding the foregoing, Distributor understands and acknowledges that
episodes following pay-per-view events may be delivered only a few days in
advance of the scheduled broadcast thereof. It shall be the Distributor's
responsibility to keep up-to-date and accurate records with regard to station
clearances so that all broadcasting contract obligations may be timely met. A
list of all station clearances will be forwarded to Owner upon completion. Owner
agrees to use reasonable efforts to ensure that, in the event of David McLane's
death or permanent incapacity after the commencement of production of episodes
for any broadcast season for which Distributor is engaged to distribute the
Program hereunder but prior to the delivery to Distributor of all episodes of
the Program for such season, steps are in place to facilitate the completion of
production and delivery to Distributor of such episodes; provided, however, that
in such event, no failure by Owner to complete production or deliver episodes of
the Program to Distributor shall be deemed a breach of this Agreement.
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11. Distributor's Obligations.
(a) In addition its other obligations herein set forth, Distributor agrees
to diligently promote the Program within the Territory and to otherwise exercise
the rights herein granted.
(b) During the Term of this Agreement, Distributor agrees not to represent
any other wrestling program without the prior written consent of Owner.
(c) Distributor shall at all times conduct itself as an independent
contractor. Except as expressly set forth herein, Distributor shall bear its own
costs and expenses in connection with the performance of its duties and
obligations under this Agreement, except that the costs of "dubs" and/or
satellite feed and all other mutually-approved marketing and sales expenses set
forth in the mutually-approved marketing and sales budget shall be borne by
Owner.
12. Termination.
(a) Either party shall have the right to terminate this Agreement at any
time, without prejudice to any other rights to which such terminating party may
be entitled, upon the occurrence of any one or more of the following:
(i) any material breach or default by the other party in the
performance of any material provision of this Agreement, which default
is not cured within five (5) business days following written notice of
such default to the defaulting party;
(ii) if any of the representations, warranties or agreements made
by the other party in this Agreement shall prove to be untrue or
inaccurate in any material respect; or
(iii) the other party becomes the subject of a petition in
bankruptcy, whether voluntary or involuntary, or makes an assignment for
the benefit of creditors, or its property is subject to a suit for
appointment of a receiver, or such party is dissolved or liquidated.
(b) In addition, Owner shall have the right to terminate this Agreement
at any time, without prejudice to any other rights to which Owner may be
entitled, upon the occurrence of any one or more of the following:
(i) Richard Perin dies, is incapacitated, or otherwise ceases to
be actively involved in the management and supervision of the day-to-day
distribution operations of Distributor provided, however, that Owner
shall refrain
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from exercising its termination right under this subparagraph (b)(i)
for a period of ninety (90) days following any such event in order to
give Distributor the opportunity to appoint a successor to Richard
Perin who may be approved by Owner, which approval shall not be
unreasonably withheld, but if Distributor fails to appoint or Owner
does not approve any such successor within such time period, then
Owner shall have the right to terminate this Agreement as aforesaid);
or
(ii) if in Owner's reasonable, good-faith business judgment,
Distributor fails to adequately service the stations broadcasting the
Program at any time during the Term of this Agreement (including,
without limitation, interfacing with station personnel to ensure the
proper promotion of the Program both using Owner-supplied promo spots
and in print, servicing stations' concerns regarding the content of the
Program, handling requests for personal appearances of performers from
the Program, informing stations of the level of performance of the
Program, ensuring stations receive the satellite feed, etc.); provided,
however, that Owner shall not have the right to terminate under this
subparagraph (b)(ii) unless and until Owner gives Distributor written
notice of any such failure to adequately service the stations and
Distributor fails to cure the same to Owner's satisfaction within
fifteen (15) days following the date of Owner's notice.
In the event of any such termination under this Paragraph 12, neither Owner nor
Distributor shall have any further obligations to the other hereunder, except
that any distribution proceeds accrued but not yet paid into the lockbox
pursuant to Paragraph 7, or paid into the lockbox but not yet distributed to the
parties pursuant to Paragraph 7, shall be distributed in accordance therewith.
Further, upon such termination, to the extent that any station contracts, ad
sales contracts or other distribution contracts entered into by Distributor are
in the name of Distributor, all such contracts shall be immediately assigned to
Owner, and Distributor shall immediately assign all of its other right, title
and interest in the Program (if any) to Owner; provided, however, that subject
to and without waiving any of Owner's rights or remedies at law or in equity,
all proceeds from such contracts shall continue to be distributed in accordance
with the terms of Paragraph 7 above.
13. Accounting Statements; Records. Commencing with the first month in
which any revenues are received pursuant to this Agreement, Distributor shall
provide Owner with a shortform monthly accounting statement within thirty (30)
days following the end of each month and a detailed quarterly accounting
statement within forty-five (45) days following the end of each quarter.
Commencing with the first semi-annual period in which Distributor is entitled to
receive any ancillary revenues (as described in Paragraph 8 above) and
continuing until such date that Distributor is no longer entitled to receive any
ancillary revenues, Owner shall provide Distributor with a semi-annual
accounting statement with respect to such revenues within ninety (90) days
following the end of each semi-annual period. Distributor shall, during the Term
hereof, keep true and correct
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books of account and records with respect to the distribution and sale of the
Program, and Owner shall, during the Term hereof, keep true and correct books of
account and records with respect to the ancillary revenues (as described in
Paragraph 8 above) derived from the Program. Each party shall have the right to
have said books of account and records of the other party audited and inspected,
at its own cost, by a firm of certified public accountants at reasonable times
during normal business hours. Such audit or audits authorized hereunder may be
made only at the place or places where such books of account and records are
then kept, it being understood that in no event shall either party be required
to make such books of account and records available at any other place or places
for audit. Each accounting statement shall be deemed final and conclusive unless
an objection is made in writing, stating the basis thereof, and delivered to the
party rendering the statement within eighteen (18) months from the rendition of
such statement, and any such objection shall be deemed waived unless the
objecting party initiates an action with respect thereto within twelve (12)
months from the date such objection is sent.
14. Restrictions on Editing and Duplication. Distributor shall ensure that
each Program is broadcast in the form distributed by Owner, including but not
limited to broadcasting all screen credits, copyright notices, and release
credits, if any, incorporated in the Program. Distributor shall have the right
to insert commercials or other locally-originated material during the broadcast
of each Program at points designated by Owner. Distributor shall have the right,
at its sole expense (subject to recoupment in accordance with Paragraph 7
above), to overdub the audio portion of each Program with non-English-language
commentary, subject to Owner's prior written approval in each instance (which
shall not be unreasonably withheld). Distributor shall have the right to
duplicate the Program for sales purposes or for any other purpose consistent
with the terms of this Agreement. Distributor shall not otherwise duplicate,
edit, take excerpts from, or add to any Program without Owner's prior written
consent.
15. Reports of Distributors. Within seven (7) days after the close of each
broadcast month, Distributor shall furnish to Owner a report setting forth the
actual dates and times of the broadcasts of the Program and advertisements for
the Program during such month. Distributor shall make reasonably available to
Owner all correspondence regarding the Program lineup and shall give Owner full
access to all Nielsen records including, without limitation, copies of Nielsen
transmittal information regarding the dates and times of the broadcast of the
Program and ratings for such broadcasts. Distributor shall use good faith
efforts to ensure that all videotapes or other tangible media containing copies
of the Program, if any, have been destroyed or completely erased, which such
efforts shall include, without limitation, obtaining certificates of destruction
or erasure.
16. Ownership of the Program. All right, title, and interest in and to the
Program, and any portion thereof, and all reproductions, excerpts, or materials
derived therefrom, shall be and remain the sole property of Owner, free from any
claim whatsoever by anyone,
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including any claims by Distributor or any person deriving any rights or
interest from Distributor
17. Owner's Warranties. Owner hereby represents, warrants and agrees as
follows:
(a) That the Program, when delivered, will be free and clear of any
liens, claims or demands of any kind or character whatsoever which would in any
way prejudice, affect or be inconsistent with the rights herein granted to
Distributor;
(b) That Owner has not entered into, and will not enter into, any
agreement which is inconsistent with any of the provisions of this Agreement,
and will not exercise any right to take any action or license or authorize any
other person to exercise any right to take any action or license which conflicts
with the rights herein granted to Distributor;
(c) That Owner has the right to enter into this Agreement;
(d) That to the best of Owner's knowledge, the Program shall not, nor
shall any of the contents thereof (including, but not limited to, plot,
characters, cast, title, action, dialogue, musical compositions, designs, set
dressing or props), nor shall the exercise by Distributor or any sublicensee of
any right or license herein granted to Distributor, violate or infringe any
trademark, trade name, copyright or patent, or any literary, dramatic, musical,
artistic, personal, private, civil, contract or property right, of any person,
firm or corporation, or libel or slander any person; and
(e) That to the best of Owner's knowledge, there are no restrictions
which would materially prevent Distributor from distributing the Program by any
media or means which rights are granted to Distributor hereunder, and there are
not and will not be any payments (out of any part of the revenues from the
distribution or exploitation of the Program or otherwise) which must be made by
Distributor to any actors, musicians, directors, writers, or to any other
persons who participated in the Program or to any union, guild or other labor
organization.
18. Distributor's Warranties: Distributor hereby represents, warrants and
agrees as follows:
(a) That Distributor has not entered into, and will not enter into, any
agreement which is inconsistent with any of the provisions of this Agreement,
and will not exercise any right to take any action or license or authorize any
other person to exercise any right to take any action or license which conflicts
with or might prejudice or derogate from the rights herein granted to
Distributor;
(b) That Distributor has the right to enter into this Agreement;
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(c) That Distributor will not duplicate or otherwise reproduce the
Program in any manner, nor permit any of its sublicensees to do so, except
specifically in connection with distribution of the Program as permitted
hereunder;
(d) That Distributor will provide in all license agreements that its
licensees will return any prints or tapes distributed by Distributor, or submit
an affidavit of erasure or destruction, promptly after the expiration of the
period of use permitted to any of such licensees. Distributor will use its
reasonable efforts to obtain the return of such items or the submission of such
affidavit; and
(e) That there are no restrictions which would or could prevent
Distributor from distributing the Program by any media or means which rights are
granted to the Distributor hereunder.
19. Indemnification.
(a) Owner agrees to indemnify Distributor and its subdistributors,
assignees and licensees, and its and their successors, assigns, officers, agents
and employees, and each of them, and to hold them, and each of them, harmless
from and against any and all claims, actions, causes of action, liabilities,
damages, judgments, decrees, losses, costs and expenses, including reasonable
outside attorneys' fees and costs, arising out of or in connection with any
breach of any of the covenants, agreements, warranties or representations herein
made by Owner or otherwise arising out of or in connection with Owner's
production of the Program or any element thereof or exploitation of the
ancillary rights in connection therewith (except to the extent Distributor is
obligated to indemnify Owner pursuant to subparagraph (b) below).
(b) Distributor agrees to indemnify Owner and its affiliated and related
companies, assignees and licensees, and its and their successors, assigns,
officers, agents and employees, and each of them, and to hold them, and each of
them, harmless from and against any and all claims, actions, causes of action,
liabilities, damages, judgments, decrees, losses, costs and expenses, including
reasonable outside attorneys' fees and costs, arising out of or in connection
with any breach of any of the covenants, agreements, warranties or
representations herein made by Distributor or otherwise arising out of or in
connection with Distributor's distribution or other exploitation of the Program
or any element thereof (except to the extent Owner is obligated to indemnify
Distributor pursuant to subparagraph (a) above).
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20. Notices. All notices and statements to be rendered hereunder shall be
addressed as follows:
To Owner: At its address stated above, with a courtesy copy to:
Lowe Gray Steele & Darko, LLP
111 Monument Circle, Suite 4600
P.O. Box 44924
Indianapolis, Indiana 46244-0924
Attention: Robert J. Milford
Phone: (317) 236-8020
Fax: (317) 236-6472
To Distributor: At its address stated above, with a courtesy copy to:
Gersten, Savage & Kaplowitz, LLP
101 East 52nd Street
New York, New York 10022
Attention: Eric Roper, Esq.
Phone: (212) 752-9700
Fax: (212) 980-5192
or at such other addresses as the respective parties may designate in writing.
21. Miscellaneous.
(a) Nothing in this Agreement shall be construed so as to make either
party hereto an agent or partner of the other. Neither of said parties shall
become liable by or because of any representation, act or omission of the other
which is contrary to the provisions of this Agreement.
(b) This Agreement shall be interpreted, construed and governed in all
respects under the laws of the State of Indiana for agreements entered into and
to be wholly performed therein.
(c) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court having competent
jurisdiction. The arbitration shall take place in Indianapolis, Indiana.
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(d) The parties intend to enter into a more formal agreement containing
additional terms and conditions customarily included in agreements of this type,
all of which are incorporated herein by this reference subject to good faith
negotiation consistent with industry custom and practice. However, unless and
until a more formal agreement is actually executed, this Agreement constitutes
the entire agreement between the parties hereto and supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof. There are no representations, promises, warranties, covenants or
undertakings other than those expressly set forth or provided for in this
Agreement. This Agreement may be modified only by a written instrument duly
executed by each of the parties hereto.
(e) Neither party shall be liable to the other for any loss, damage or
default occasioned by strike, civil disorder, governmental decree or regulation,
acts of God or any other force majeure. In the event of the occurrence of any
such force majeure, the Term of this Agreement will be suspended and extended
for the duration of such force majeure.
(f) Each party hereto shall execute, acknowledge and deliver any and all
further documents or amendments consistent herewith which the other party may
reasonably deem necessary or desirable to carry out the purposes of this
Agreement. Distributor hereby irrevocably appoints Owner as its true and lawful
attorney-in-fact with full power to execute, acknowledge and deliver any and all
such documents Distributor fails to execute, acknowledge and deliver after a
reasonable opportunity to do so. Such appointment shall be coupled with an
interest and irrevocable.
(g) Any provisions herein found by a court to be void or unenforceable
shall not affect the validity or enforceability of any other provisions.
(h) Neither this Agreement nor the rights or obligations of either party
hereto may be assigned to any other person or entity without the prior written
consent of the other party. Notwithstanding the foregoing, either party may
assign this Agreement to a company acquiring all or substantially all of the
assigning party's assets or into which the assigning party merges or is
consolidated or to any company controlling, controlled by or under common
control with the assigning party; provided, however, that Distributor may not
assign this Agreement without Owner's prior written consent unless Richard Perin
continues to be actively involved in the management and supervision of the
day-to-day distribution operations of the company distributing the Program.
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(i) The waiver by either party of a breach of any provision of the
Agreement shall not operate or be construed as a continuing waiver or a waiver
of any subsequent breach by the other party.
AGREED TO AND ACCEPTED BY:
WOW ENTERTAINMENT, INC.
By /s/ David B. McLane
------------------------------------
David B. McLane, President
M/G PERIN, INC.
By: /s/ Richard Perin
------------------------------------
Richard Perin, President
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