This Agreement is made as of this the 5th day of February, 1993, by and between Wilma Big Bucks, an individual resident of Boise, Idaho (hereinafter referred to as "Investor") and Filmright Incorporated, a California corporation (hereinafter referred to as the "Production Company") regarding an investment of $1,500,000 in consideration of acquiring the right to share in the equity of the motion picture entitled "Invasion >From Chunga" ("Picture") to be produced by the Production Company.
1. The Picture and Production Arrangements: The Picture shall be based upon that certain screenplay of the same title heretofore written by James Q. Screenwriter and shall be produced by the Production Company in accordance with that certain "Co-Production Agreement" dated as of December 5, 1992, a copy of which is attached hereto and marked Exhibit "A". The Production Company hereby warrants and represents that: (i) no deferments (other than those set forth in Exhibit "A"") have in the past or will in the future be granted to any person or party which in any way affect the interests of the Investor described below; (ii) no so-called gross participations in profits have in the past or will in the future be granted to any person or party which in any way affect the interests of the Investor described below; and (iii) the Production Company shall not modify, amend or terminate the attached Co- Production Agreement without first obtaining Investor's prior written consent to do so.
2. Distribution of the Picture: The Production Company shall use its best efforts to cause the Picture to be exploited in all markets and media, so as to maximize the monetary return to be derived by the Picture. To that end, the Production Company shall endeavor to arrange for third parties to distribute and/or exploit the Picture on such commercially reasonable terms as the Production Company might be able to obtain. The Production Company shall be entitled to reimbursement out of such distribution proceeds of any reasonable direct out-of-pocket third party costs or charges it might incur in connection therewith. The Production Company shall receive no consideration whatsoever for the services it shall render pursuant to the terms of this paragraph. Further, the Production Company shall have no obligation to itself distribute or exploit the Picture if it is unable to arrange for third parties to do so.
3. Recoupment of Investment; Percentage Share of Profits: In consideration of the Investor making that financial contribution called for in paragraph 4 hereof, the Production Company shall pay or cause to be paid to the Investor the following:
(a) Recoupment and Interest--Priority Payments: One-Hundred percent (100%) of any and all net profits as that term is defined in the Picture's domestic theatrical distribution agreement (subject, however, to reimbursement deductions permissible under paragraph 2 hereof), plus interest paid on the unpaid balance of the invested amount at the rate of 18% per annum with such interest accruing from the date on which the full amount of the $1,500,000 is placed under the control of the Production Company for the purposes described herein, until the Investor is repaid in full.
(b) Net Profit Participation: Thirty-nine percent (39%) of all net profits of the Picture as that term is defined in the Picture's distribution agreement for its domestic theatrical release. The net profits participation of the Investor as described in this sub-paragraph 3(b) shall continue so long as the Picture is generating net profits based on its distribution and exploitation in any, every and all markets and media, except that the Investor shall have no interest in whatever residual value the Picture may have, if any, following the completion of such third-party distribution and exploitation, i.e., the Investor shall have no interest in whatever value, if any, the Picture may have as part of a library of films that the Production Company has produced or will produce in the future.
(c) Third Party Net Profit Participations: The Production Company shall be free to grant additional net profit participation interests to such third parties as it might elect without first obtaining the Investor's consent thereto, provided, that no such grant of net profit participations may in any way adversely affect the Investor's net profit participations described in sub-paragraphs (a) and (b) above.
4. Investor's Monetary Contribution: The Investor shall deliver a cashier's check in the amount of $1,500,000 to the Production Company payable to the Production Company's designated Escrow Account, however, the escrow agreement and instructions shall instruct the escrow holder not to release the full amount of such funds from escrow to the Production Company and the full amount of such funds shall not be released from escrow to the Production Company, unless and until each and all of the following enumerated conditions precedent have first occurred:
(a) Excellent Completion Guarantor has delivered to the Investor a copy of its duly executed Completion Guaranty relating to the Picture naming the Investor as a guarantee to the extent of its investment therein, together with: (i) a writing indicating all conditions precedent to the guarantor's obligations arising under such completion guaranty have occurred; and (ii) so-called "cut-through" endorsements between the Investor and the actual guarantor of completion of the Picture.
(b) Certificates of insurance naming the Investor as an additional insured have been delivered to the Investor, indicating that all insurance normally obtained in connection with the production of a motion picture photoplay, including errors and omissions insurance, has been obtained with commercially reasonable liability limits and deductibles, and that these policies cannot be canceled or amended without first giving thirty (30) days' prior written notice.
The Investor agrees, however, that the Production Company's Escrow Agreement and Instructions to the Escrow Holder may provide that the Escrow Holder is authorized to pay an amount equal to the initial premiums of the above described completion guaranty and motion picture insurance out of the escrowed funds and to the Production Company for its use in securing such completion bond and insurance coverages and that the Investor shall be at risk on such amounts in the event, for any reason, the distribution and exploitation of the Picture fails to generate net profits.
5. Investor Approval Rights: The Investor shall be actively involved on a regular basis and in a material manner in significant decisions relating to the development, pre-production, production, post-production, distribution and other exploitation of the Picture. In this regard, the Investor shall have the right to approve the final budget, shooting script, producer, director, lead actors, director of photography and distribution arrangements for the Picture.
6. Budget: It is intended that the direct cash cost budget of the Picture be $1,500,000 or less, inclusive of non-reimbursable overhead and pre-production expenses incurred by the Production Company (the "Budget Cost").
7. Return of Unexpended Contributions: If the actual cost of producing the Picture should be less than the Budget Cost set forth in paragraph 5 hereof, the Production Company shall pay fifty percent (50%) of any such sum remaining to the Investor. Any monies received by the Investor in accordance with this paragraph 6 shall reduce, dollar for dollar, that amount of money payable to the Investor in accordance with paragraph 3(a) above.
8. Representations and Warranties: The Production Company hereby represents and warrants to the Investor that:
(a) Powers and Authority: It is duly incorporated, validly existing and in good standing. It has the corporate power and all necessary rights and title to enter into and perform this Agreement and the transactions contemplated hereby or referred to herein and has taken all necessary action to authorize the entry into and performance of this Agreement and such transactions.
(b) Legal Validity: This Agreement constitutes a legal, valid and binding obligation of the Production Company and is in proper form for enforcement against it.
(c) Non-Conflict With Laws: The entry into and performance of this Agreement and the transactions contemplated hereby do not and will not conflict with: (i) any existing law or regulation or any official or judicial order, or (ii) its articles of incorporation, or (iii) any agreement or document to which it is a party or which is binding upon it or any of its assets.
Without limiting the generality of the foregoing, the Production Company represents and warrants that there are not now any liens, claims, encumbrances, legal proceedings, restrictions, agreements or understandings which might conflict or interfere with, limit, derogate from, or be inconsistent with or otherwise affect any of the provisions of this Agreement or any of the representations or warranties of the Production Company contained herein, including without limitation, any U.C.C. filings, copyright assignments or other liens, inconsistent herewith or offsets or other costs charged against the Picture by any distributor pursuant to cross-collateralization agreements or otherwise.
(d) Consents: All authorizations, approvals, consents, licenses, exemptions, filings, registrations, notarizations and other matters, official or otherwise, required by the Production Company or advisable in connection with the entry into, performance, validity and enforceability of this Agreement and the transactions contemplated hereby the Production Company have been obtained or effected and are in full force and effect (other than the registration of security interests to be created pursuant hereto).
(e) Litigation: No litigation, arbitration or administrative proceedings are threatened or, to its knowledge, pending which call into question the validity or performance of its obligations hereunder.
(f) Copy Documents: Each copy document delivered to the Investor by or on behalf of the Production Company under or in connection with this Agreement and/or any prior negotiation between the Production Company and the Investor constitutes a true and complete copy of the document of which it purports to be a copy and all facts, circumstances and other documents which might materially affect their interpretation have been disclosed in writing to the Investor.
(g) Material Information: All information which might be material to a person assuming the obligations and acquiring the rights assumed and acquired by the Investor pursuant to this Agreement has been disclosed in writing to the Investor and there are no facts or circumstances which might make such information misleading or inaccurate.
(h) Survival: The Production Company's warranties, representations and agreements are of the essence of this Agreement and shall survive the early termination hereof. None of the Production Company's warranties, representations or agreements shall in any way be limited by reason of any investigation made by the Investor or on behalf of the Investor regarding said warranties, representations or agreements.
9. Indemnification by Production Company: The Production Company shall, at its own expense, indemnify, save and hold harmless the Investor and its successors, licensees, assigns, agents, representatives and affiliates from and against any and all claims, demands, causes of action, obligations, liability, loss, damage, cost and expenses (including reasonable attorneys' fees), incurred or sustained by reason of or arising out of any breach or alleged breach of any of the warranties, representations or agreements herein made by the Production Company, or from any reliance upon any such warranties, representations or agreements. If any person or entity shall make any claim or institute any suit or proceeding alleging any facts, which, if true, would constitute a breach by the Production Company, of any warranty, representation or agreement herein made, the Production Company shall give prompt written notice of same to the Investor and the Production Company shall undertake at its own cost and expense the defense thereof and shall supply competent and experienced counsel to defend any such suit or proceeding. The Investor may also engage his own counsel in connection with any such suit or proceeding.
10. Accounting and Reports by Production Company: (a) The Production Company shall maintain complete books and records with respect to the distribution and exploitation of the Picture. The Production Company shall render to the Investor, on a semi-annual basis for the first two years after initial distribution of the Picture, a written statement of monies due the Investor hereunder, if any ("Investor Statement"), and such Investor Statement shall be accompanied by remittance of any amount shown to be due to the Investor thereon. Thereafter, Investor Statements and payments shall be provided annually for as long as the Picture generates net profits. If any error is made by the Production Company in any Investor Statement, it may be corrected by the Production Company within two (2) years thereafter by making any necessary deductions or additions on subsequent Investor Statements, or at the Production Company's option by rendering an Amended Investor Statement. Each Investor Statement shall be rendered within forty-five (45) days following the end of each accounting period. Any Investor Statement rendered by the Production Company hereunder shall be deemed conclusively true and correct and binding upon the Investor, shall constitute an account stated and be incontestible unless the Investor delivers to the Production Company in writing specific objections, setting forth specific transactions or items objected to and the basis of such objections, within one (1) year from the date of such Investor Statement. Any recovery by the Investor shall be limited to those items specifically objected to in writing by the Investor within said one (1) year period.
(b) The Investor shall have the right to examine the books and records of the Production Company to the extent they pertain to the Picture. Such examination shall be made during reasonable business hours, upon reasonable advance written notice, at the regular place of business of the Production Company where such books and records are maintained, and shall be conducted on the Investor's behalf and at the Investor's expense by the Investor's designee. Such examination shall not be made more frequently than annually and no more than once with respect to any accounting period or Investor Statement rendered hereunder. With respect to any accounting period for which an Investor Statement has been rendered by the Production Company, such examination shall be permitted only for a period of one year from the date such Investor Statement was received by the Investor. Investor's examination shall be limited to those records relating to the Picture and under no circumstances shall the Investor have the right to examine records relating to the Production Company's business generally or relating to other motion pictures for purposes of comparison or otherwise.
(c) No action, suit or proceeding arising out of this Agreement or concerning the Investor Statement or other accounting rendered by the Production Company hereunder or to the period of time to which such Investor Statement or accounting relates may be maintained against the Production Company unless commenced within one (1) year after the date such Investor Statement or accounting is received by the Investor.
(d) The Production Company shall, upon the Investor's request, avail itself of any audit right the Production Company might have under any distribution agreement the Production Company might enter into relating to the Picture. The expenses of such an audit, if not reimbursable by such distributor shall be a deductible expense under paragraph 2 hereof.
11. Funds Held in Trust: All monies received by the Production Company which are payable to the Investor in accordance with the provisions of this Agreement shall be held by the Production Company, in trust, for the sole use and benefit of the Investor and shall be immediately deposited upon receipt in a separate interest-bearing bank account naming the Investor as the beneficiary thereof. The Production Company shall not commingle the monies payable to the Investor hereunder with other monies of the Production Company.
12. Relationship of Parties: The Investor and the Production Company each acknowledge that they are independent contractors and that no partnership, joint venture, agency or employment relationship has or will be created by this Agreement. However, nothing herein shall prevent the Production Company from subsequently initiating arm's length negotiations with and engaging the Investor and/or the Investor's company, which is in the business of creating motion picture scenery, as an independent contractor for the purpose of providing necessary scenery for the Picture, in which case the Investor and/or his company shall be paid budgeted costs out of the Picture's budget.
13. Business Opportunities: Each of the parties acknowledges that this Agreement relates only to the Picture and than none of the parties will in any way be restricted from any other business activity (including any motion picture activity), whether or not competitive to the Picture, it being agreed that so-called "corporate and/or joint venture opportunities" or fiduciary opportunities in relation to any such other activities are hereby waived by each of the parties.
14. Additional Documents: Each of the parties agree to execute any additional documents which may be required or be desirable to fully effectuate the purposes and intent of this Agreement or to carry out the obligations of the parties hereunder, provided that they are not inconsistent with the provisions of this Agreement.
15. Notices: All notices hereunder shall be in writing and shall be served by personal delivery to the Investor or the Production Company, as the case may be, or by registered or certified mail, return receipt requested, or by telegram or FAX, addressed as follows:
Investor: Wilma Big Bucks
11234 Big Sky Lane
Boise, Idaho 70854
Production Company: Filmright Incorporated
230 Montana Avenue, Suite 555
Santa Monica, California 90031
Any party may change its address at any time by written notice to the other parties. Notices served by mail shall be deemed to be served three (3) business days next following deposit in the U.S. mails, and in the case of telegrams on the next business day following delivery of the notice to the telegraph office, charges prepaid.
16. Assignment: No party hereto shall have the right to assign all or any part of its right or obligations hereunder without the prior consent of the other party, except that nothing contained in this sentence shall prevent any party from assigning its right to receive monies hereunder.
17. Miscellaneous: (a) This Agreement may not be modified except by written agreement signed by each of the parties hereto.
(b) This Agreement shall in no event be construed as a third party beneficiary contract and is not intended for the benefit of any person or company whomsoever except the parties hereto.
(c) No waiver by one party of a breach or default by the other party shall be deemed to be a waiver of any preceding, continuing or succeeding breach of the same or any other provision of this Agreement.
(d) Each party acknowledges that no representation or warranty not expressly set forth in this Agreement has been made or relied upon by the other party, it being agreed that this Agreement constitutes the entire Agreement of the parties regarding the subject matter hereof and supersedes all prior Agreements with respect thereto.
(e) This Agreement has been entered into in the State of California and shall be construed and enforced under and subject to the laws of said state.
(f) Should there be any dispute between the parties concerning the interpretation of this Agreement or concerning an alleged breach of this Agreement, which the parties are unable to resolve after consultation with each other, such dispute shall be decided by arbitration pursuant to the regulations and procedures of the American Arbitration Association. The parties agree that any award rendered by the American Arbitration Association may be entered in the appropriate state or federal court located within the state of California.
18. Attorneys' Fees: In any action or proceeding between or among the parties hereto to interpret or enforce any of the provisions hereof, the prevailing party shall, in addition to any other award of damages or other remedy, be entitled to reasonable attorneys' fees and costs.
WHEREFORE, the parties have executed this Agreement on the date first above written.
Investor:
Wilma Big Bucks
Production Company: Filmright Incorporated
By:
James Q. Filmmaker, President