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1 3.26 Form: Subject Matter Agreement for a Multimedia Product AGREEMENT by and between Multimedia Producer, Inc., a corporation organized and existing under the laws of the State of New York, with a principal place of business at Madison Avenue, New York, New York (hereinafter referred to as "Producer") and Aircraft Manufacturer Corp., a corporation organized and existing under the laws of the State of Washington, with a principal place of business at Oak Road, Walnut Creek, WA (hereinafter referred to as "Manufacturer"). WHEREAS, Producer is in the business of publishing and distributing multimedia titles in CD-ROM format; WHEREAS, Manufacturer is in the business of designing and manufacturing jet aircraft including fighter planes; WHEREAS, Producer wishes to produce a multimedia title tentatively entitled "Jet Fighter", which would chronicle the design and development of an advanced fighter jet by a major aircraft manufacturer (the "Product"); and WHEREAS, Manufacturer is willing to permit its fighter jet aircraft to be the subject of the Product, subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the promises and covenants recited below, it is hereby agreed by and between Producer and Manufacturer as follows: 1. Access Producer wishes to use, and Manufacturer has agreed to allow Producer to develop a Product concerning the design and development of Manufacturer's fighter jet aircraft identified on Schedule A (the "Jet") Manufacturer agrees to provide Producer with reasonable access to information concerning the design and development of the Jet. Such access shall include, but not be limited to, access to design specifications, drawings, blueprints, and drawings of the Jet, and 2 interviews with Manufacturer's personnel involved with the Jet's design. 2. Confidentiality Pursuant to the provisions of Section 1, Producer will have access to and be furnished with certain of Manufacturer's Confidential Information as defined below. Producer recognizes that such information is confidential and agrees that, as a condition to Producer being provided access to or furnished with such information, Producer will treat any Confidential Information which Manufacturer may provide Producer in accordance with the following terms and conditions: (a) As used in this Agreement, the term "Confidential Information" shall be presumed to mean all information which is made available to Producer hereunder. Without limitation of the foregoing, Confidential Information shall include any and all information concerning Manufacturer's Jet fighter and other products and services, including, but not limited to, processes and procedures relating thereto, which Manufacturer deems and treats as confidential and/or proprietary and such aspects of Manufacturer's business as Manufacturer treats as confidential, including, without limitation, information about Manufacturer's market research, ideas, plans, operations, procedures, finances, trade secrets, copyrights, trademarks, patents, know-how and technology with respect to its business and existing and future products and services. Notwithstanding the foregoing, Confidential Information shall not include information which: (i)\x11is or becomes generally available to the public through no act or omission by Producer; (ii)\x11is or becomes available to Producer on a non- confidential basis by a source other than Manufacturer, its affiliates, or their respective employees, representatives or agents; or (iii)\x11is or becomes generally known within the aircraft industry through no act or omission of any party under an obligation of confidentiality to Manufacturer. (b) Producer agrees that it will not, without the prior written consent of Manufacturer, directly or indirectly, use, authorize the use of, or disclose to any party any Confidential Information which has been or 3 may be made available to Producer, or to which Producer has had or will have access. (c) Except as may be otherwise permitted by Manufacturer in writing, Producer agrees that it will not, directly or indirectly, use or authorize the use of any Confidential Information in any manner whatsoever other than in preparation of the Product. (d) Producer agrees to take all necessary steps to safeguard and maintain the confidentiality of Confidential Information made available to it or to which it has had or will have access. (e) Upon completion of the Product, Producer shall immediately return to Manufacturer all notes, documents and other materials that contain or reflect Confidential Information, whether provided to Producer by Manufacturer or created by Producer, including oral information reduced to written form by Producer. 3. Approvals Upon completion of the design of the Product, but before any development of the Product commences, Manufacturer shall have the right to review a detailed written description of the Product, and any photographs, illustrations, diagrams, charts, video and film segments to be included in the Product (the "Design Work-up"), and to approve or disapprove the inclusion of Confidential Information therein and factual accuracy. Within thirty (30) working days of Manufacturer's receipt of the Design Work-up, Manufacturer's designees shall review the Design Work-up and notify Producer in writing of any instructions or comments Manufacturer may have concerning the inclusion of Confidential Information or factual inaccuracies, and Producer shall revise the Design Work-up in accordance with Manufacturer's instructions and comments and resubmit the same to Manufacturer for its approval. Upon Manufacturer's approval of a Design Work-up, Producer shall commence development of the Product. Upon creation of a preliminary version of the Product (the "Alpha Version"), Producer shall deliver the Alpha Version to Manufacturer for approval. Within ten (10) working days of Manufacturer's receipt thereof, Manufacturer's designees shall review the Alpha Version and notify Producer in writing of any specific instructions or comments 4 Manufacturer may have concerning the inclusion of Confidential Information and/or factual accuracies, and Producer shall revise the Alpha Version of the Product accordingly. Upon Manufacturer's approval of the Alpha Version, Producer shall commence development of a final version ("Final Version") of the Product. No changes shall be made to the approved Alpha Version in creating the Final Version without affording Manufacturer an opportunity to review such changes and any such changes relating to or affecting Confidential Information or factual accuracy to be included in the Product shall be subject to Manufacturer's further prior approval. Notwithstanding any approval by Manufacturer of any version of the Product as herein provided, the Final Version of the Product shall be subject to Manufacturer's prior approval with respect to the inclusion of any Confidential Information and factual accuracy. Manufacturer shall have the right to approve any exploitation of all rights in and to the Product reserved by Producer, including, without limitation, television and motion picture rights, and any derivative or adaptation of the Product to be created. 4. Publication Subject to Manufacturer's approval pursuant to Section 3 of this Agreement of the Alpha and Final Version of the Product, and the materials to be included in it, Producer shall use its best efforts to ensure that the Product shall be published not later than two (2) months after the date on which the Jet is announced to the public (the "Announcement Day"). 5. Copyright Subject to the terms and conditions of this Agreement, the copyright in and to the Product shall be owned by Producer. Except as provided herein, Manufacturer shall have no right, title or interest in the Product or any portion thereof. Manufacturer shall have the right to approve all derivatives and adaptations of the Product, including without limitation, derivatives and adaptations which would in any way change the Product as approved by Manufacturer. 5 6. Release; Indemnification Producer shall be responsible for obtaining any releases which may be necessary or required by Producer in connection with the Product, including without limitation, releases from Manufacturer personnel. Producer shall identify and hold Manufacturer and its affiliates harmless from and against any and all liability, claims, demands, loss, damage and expenses (including reasonable attorney's fees and expenses) arising out of or related to the Product and the publication, sale, distribution, advertising and promotion of the Product or the exploitation of any rights in and to the Product. The indemnity provided for herein shall survive the termination of this Agreement. 7. Termination Producer shall have the right to terminate this Agreement upon not less than ten (10) days notice to Manufacturer in the event that Manufacturer materially breaches its obligations to provide reasonable access to Producer as provided for herein above and fails to cure such breach within ten (10) days following notice thereof. Manufacturer shall have the right to terminate this Agreement upon not less than ten (10) days notice to Producer in the event any of the following events shall occur: (a) with respect to the inclusion of Confidential Information, Manufacturer shall fail to approve (i)\x11any portion of the Product after it has been revised pursuant to Section 3 above and the parties are unable to agree as to further revisions or other action which would result in a version of the Product acceptable to Manufacturer, or (ii)\x11the Final Version of the Product. (b) Producer shall fail to (i)\x11deliver the Final Version of the Product to Manufacturer by the date provided for herein or (ii)\x11revise any portion of the Product as provided for herein. (c) Producer breaches any of its obligations under this Agreement and fails to cure such breach within ten (10) days following notice thereof. 6 Notwithstanding the foregoing, this Agreement shall automatically terminate on the second anniversary date of the first publication of the Product. 8. Effect of Termination Upon termination of this Agreement for any reason, Producer shall have no right to disclose or use, directly or indirectly, in any form or for any purpose, any Confidential Information to which Producer had access or which was furnished to Producer during the period this Agreement was in effect and Producer shall immediately return to Manufacturer all notes, documents and other materials containing or reflecting such information, whether provided to Producer by Manufacturer or created by Producer, including oral information reduced to written form by Producer. 9. Approvals All approvals to be given by Manufacturer hereunder shall be given in writing and shall not be unreasonably withheld and may be exercised as long as the Product or any derivative or adaptation thereof is exploited. 10. Royalties For the rights, privileges and licenses granted hereunder, Producer shall pay Manufacturer in the manner hereinafter provided until the termination of this Agreement a royalty ___ percent (__%) of Sales Income (as defined herein). As used herein, "Sales Income" shall mean all gross revenues received by Producer in connection with any sale, license, lease or other exploitation of the Product less: (i)\x11transportation and shipping charges, including insurance; (ii)\x11monies received for demonstration and promotional Products; (iii)\x11sales, use and excise taxes and duties paid or allowed by Producer and any other governmental charges imposed upon Producer for the production, use, sale or license of the Product; (iv)\x11actual credits, discounts, allowances and returns granted to customers; (v)\x11normal and customary trade and quantity discounts and allowances; and (vi)\x11credits for uncollected or uncollectible 7 accounts. Except as herein provided, Sales Income shall be determined by using generally accepted accounting principles consistently applied. Producer shall pay Manufacturer __________ ($________) as a non- refundable advance (the "Advance") of royalties upon the execution of this Agreement. Any royalties earned by Manufacturer will accrue against the Advance until such royalties exceed __________($________), after which they will be paid directly to Manufacturer. Producer shall render to Manufacturer, on a quarterly basis, commencing with the quarter after the first distribution of the Product takes place, a detailed written statement of the fees due to Manufacturer or accrued by Manufacturer against the Advance. Such statement shall be accompanied by a remittance of such amount as shown to be due. Each statement shall be rendered within forty-five (45) days following the end of each quarterly period; provided, however, that no statement shall be furnished for any such period in which there are no fees due to, or accrued by Manufacturer. Any statement remitted by Manufacturer hereunder shall conclusively be deemed true and correct and binding on Manufacturer unless Manufacturer submits to Producer in writing within two (2) years after such statement has been remitted to Manufacturer specific objections to the submitted statement. Manufacturer shall have the right at its sole cost and expense to cause an independent certified public accounting firm reasonably acceptable to Producer to examine and inspect the books and records of Producer which relate to the Product purpose of determining the accuracy of statements rendered by Producer. 11. Remedy Producer acknowledges and agrees that the injury Manufacturer or its affiliates would suffer if it breaches its confidentiality obligations under this Agreement would result in irreparable harm which could not adequately be compensated by money damages. The provisions of this Section 11 shall survive the termination of this Agreement. 8 12. Notices All notices and requests in connection with this Agreement shall be given or made upon the respective parties in writing and shall be deemed to be given as of the day such notice or request is sent via confirmed facsimile transmission or if deposited in the U.S. mails, postage prepaid, certified or registered, return receipt requested, to the addresses set forth above or to such other address as the party to receive the notice or request so designates by written notice to the other. 13. Severability In the event that any provision of this Agreement or any obligation or grant of rights by either party is found invalid or unenforceable pursuant to a judicial decree or decision, any such provision, obligation or grant of rights shall be deemed and construed to extend only to the maximum permitted by law and the remainder of this Agreement shall remain valid and enforceable according to its terms. 14. Assignment Neither party hereto may assign its rights, duties or obligations under this Agreement, in whole or in part, to any other person or entity without the prior written consent of the other party. Notwithstanding the foregoing this Agreement shall be assignable by Producer to an affiliated entity, or upon the transfer of the right to license or sublicense the Products to the transferee of said right, by providing written notice to Manufacturer. 15. Complete Agreement This Agreement sets forth the entire understanding of the parties as to its subject matter and may not be modified except in a writing executed by both parties. 9 16. Governing Law; Arbitration This Agreement shall be governed in all aspects by the laws of the United States of America and the State of New York. All disputes and/or claims arising under this Agreement shall be brought before the American Arbitration Association under the rules of that organization then in effect, except that the parties agree that if they enter such arbitration proceeding under this Agreement, they will each name one (1) independent arbitrator, and the arbitrators chosen by the parties will name a third arbitrator, and the matter will be heard by the three (3) named arbitrators. 17. Independent Contractors It is expressly agreed that Producer and Manufacturer are acting hereunder as independent contractors, and under no circumstances shall any employees of one party be deemed the employees of the other for any purpose. This Agreement shall not be construed as authority for either party to act for the other party in any agency or other capacity or to make commitments of any kind for the account of or on behalf of the other except to the extent and for the purposes expressly provided for herein. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date hereof. MULTIMEDIA PRODUCER, INC. By: __________________________ Name: _______________________ Title: _________________________ 10 AIRCRAFT MANUFACTURER CO. By: ____________________________ Name: __________________________ Title: ___________________________