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EXHIBIT 10.1
[PARAMOUNT PARKS LETTERHEAD]
April 20, 2000
Xxx Xxxxxxx
President
Theme and Leisure Development
Xxxx Xxx Media
00000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxxx
President
Xxxx Studio
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
RE: 7TH PORTAL SIMULATOR FILM MEMORANDUM OF UNDERSTANDING
Gentlemen:
This document shall serve as a Memorandum of Understanding ("MOU") between
Paramount Parks, Xxxx Xxx Media, and Blur Studio pursuant to the creation,
production, and distribution of the large format, 3-D simulator film
incorporating The 7th Portal concept and characters.
This MOU, attached to Article I. Term Sheet, Rev.2.0 April 20, 2000 and Exhibit
"C" constitute an Interim Agreement to begin development of the film, pending
final draft and negotiations of the Film Production and Distribution Agreement.
Each Party shall keep detailed financial records of its expenditures under this
Interim Agreement, such expenditures to be booked against the total budget,
when finalized.
I trust that the foregoing, and the attachments hereto, represent a fair and
reasonable representation of our understanding. If you agree, please so indicate
by signing in the space provided below, initialing the Exhibits in the lower
right hand corner, and returning one original to me. Thank you.
Sincerely,
/s/ XXXX XXXXXXX
Xxxx Xxxxxxx
Vice President, Design + Entertainment
Paramount Parks
Agreed to and Accepted Agreed to and Accepted
/s/ /s/
----------------------------- -----------------------------
Xxx Xxxxxxx Xxx Xxxxxx
Xxxx Xxx Media Blur Studio
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7TH PORTAL SIMULATOR FILM
TERM SHEET
March 30, 2000
Rev.2.0 April 20, 2000
PARTIES TO THE AGREEMENT:
Xxxx Xxx Media, Inc. (SLP), Paramount Parks Inc. (PPI), and Blur Studio
(Blur) (hereinafter collectively referred to as "the Parties").
DEFINITIONS:
A. "Film" means a 3.75 to 4.25 minute long simulator film, ideally
4.00 minutes.
B. "Video Pre-Show" means a 3.75 to 4.25 minute piece (identical in
length and synchronous to the Film) to be utilized in the cue process
for viewer engagement.
C. "NewCo" means a new entity, in the form of a Limited Liability
Corporation, to oversee the production of the Film from conception to
completion, including development, funding, creative approval,
production, and Film distribution. Newco will have three (3) members
-- PPI, SLP, and Blur. PPI will act as Newco's Managing Member. The
administrative duties and responsibilities of the Managing Member
shall include, but not be limited to: (a) administering any and all
banking functions (understanding that any check disbursements will
require two signatures); (b) reviewing, maintaining, and auditing all
Newco records; (c) overseeing, and engaging professional services
where necessary, for all business and legal matters; and (d) managing
all matters with respect to protecting the Film and Video Pre-Show.
SLP and PPI will jointly be responsible for the Film's creative,
production, and distribution-related decisions. Xxxx will be
responsible for producing the Film, Sound Track, and Video Pre-Show.
D. "PPI Park" or "Parks" means those theme parks currently owned by PPI
in Cincinnati, OH; Richmond, VA; Santa Clara, CA; Toronto, Canada;
and Charlotte, NC.
E. "Distributor" means one or more distributors of the Film in commercial
markets outside PPI Parks.
F. "Production Budget" means the total costs for the production of the
Film, said costs not to exceed US$1.5 Million.
G. "Financing" means US$500,000 cash or cash equivalent each from SLP and
PPI, for a total of US$1.0 Million. Blur will contribute an
additional US$500,000 in production services, said services to be
deferred mark-up, overhead, and amortization based on labor,
materials, equipment, and facilities. Xxxx's contribution shall be
guaranteed in the form of a Promissory Note to Newco.
X. "Executive Producers" means Xxx Xxxxxxx of SLP and Xxxx Xxxxxxx of
PPI.
I. "Producer" means Blur Studio.
J. "Line Producer" means Xxx Xxxxxx.
X. "Film Director" means Xxx Xxxxxx.
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THE DELIVERABLES:
No later than March 1, 2001, Newco shall receive the following complete
film package: the Film in the 5-70 format, a digitally-mastered Soundtrack
on laser disc, and a Video Pre-Show on laser disc ("the Deliverables").
The Film will be rendered in High Resolution Computer Generated Images,
8-70 format, action saved for 5-70 reduction, in both 2D and 3D at 30
frames per second. Animation will be rendered in High Resolution 3-D
rather than flat cell, and will use state-of-the-art motion capture
techniques where appropriate. The Soundtrack, at a minimum, will be
6-tracks digitally mastered, prepped for solid-state digital playback, and
suitable for on-site mixing. In addition, a Video Pre-Show will be shot
and edited on video and transferred to laser disc. The quality of the
Film, Soundtrack, and Video Pre-Show will be equal to or greater than the
highest theme park industry standard and will be suitable for exhibition
in motion simulation theaters and outside commercial simulator
attractions.
UNDERLYING INTELLECTUAL
PROPERTY RIGHTS:
SLP owns the underlying "7th Portal" intellectual property rights. SLP
shall grant to Newco a non-revocable, exclusive license for a period of
six (6) years from the date the Film is completed to use 7th Portal
characters in its effort to produce, distribute, and exploit the
Deliverables, said rights shall include music and print publishing, sound
recording, merchandising, and theme park walk-around character use. SLP
shall not be entitled to any remuneration in the form of license fees or
royalties for the above-delineated rights.
TERM -- NEWCO:
Newco shall come into existence May 1, 2000 and be dissolved April 30,
2007 ("Term"). At the end of the Term, and upon dissolution of Newco, the
Parties' rights shall be as follows with respect to the Deliverables:
(a) Newco will assign a one-third (1/3) interest in the Deliverables
to each of PPI, Blur, and SLP.
(b) With respect to the Film, its negative/master will be stored
through a reputable post-production house in an appropriate
vault in Los Angeles. Any Party seeking a reproduction of the
Film may do so by contacting the production house and making
appropriate arrangements (at that Party's cost). Notice of
reproduction by any Party must be given to the other former
Parties.
(c) The Parties may further exploit the Deliverables, without any
obligation to share the proceeds with the other then-former
Parties, subject to any existing distribution-related
contractual obligations that were agreed and entered into prior
to Newco's dissolution.
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FUNDING:
1. The breakdown for the US$1.5 Million budget is attached hereto as Exhibit
"A" along with cash requirements from the contributors attached as
Exhibit "B". Blue shall submit a budget breakdown listing each phase and
element of development and production, and delineate that portion of each
element that will be paid from Newco's funding and the remainder to be
treated as Xxxx's deferral, provided said remainder does not exceed
US$0.5 Million. Any expenses or costs incurred by the Parties during the
completion of the Film (except those approved production costs included
by Xxxx) are not reimbursable by Xxxxx.
2. PPI and SLP will each deposit US$500,000 in a Newco account. Each of the
Parties understand that, there will be no obligation to repay another
Party, until such time that US$1.0 Million has been deposited into a
Newco account in cash or cash equivalents. Disbursements will be credited
equally to each contributor.
3. PPI agrees to act as the completion guarantor for this project. In the
event the costs exceed US$1.0 Million prior to the completion of the
project, PPI will request additional cash contributions from the other
Parties. In the event any Party chooses not to contribute additional
cash, that Party understands that its interest (originally at 1/3) will
be reduced to reflect the adjusted interest in the project, while any
Party that chooses to contribute the additional cash, will receive an
increased percentage interest.
4. Xxxx shall submit monthly cost reports to Newco, and the Managing Member
will be responsible to verify progress on the Film prior to payment
disbursements. Payments will be made only to the extent that actual work
has been completed.
5. Upon completion of the Film and for a period of one (1) year thereafter,
Xxxxx's Managing Member shall have the right to audit Xxxx's books with
respect to the Film, at Newco's cost. In the event that discrepancies of
more than five percent (5%) are discovered, Blur will be required to pay
for the audit and reimburse Newco for any funds owed it.
6. In the event that either SLM or PPI identifies a third-party to assume
all or a portion of their respective interest in the Film, the Party
seeking to assign its interest must obtain prior approval from the other
Parties and must give the other Parties the Right of First Refusal to
acquire the interest at a level and in an amount equal to that being
offered to the third-party.
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PPI LICENSE:
7. PPI shall be granted a non-revocable, royalty and license-free
license for its five existing parks, in perpetuity, commencing upon
completion of the Film, subject to the following:
(a) PPI shall have exclusivity within a 250-mile radius of each
of its parks for the first two (2) years:
(b) In the event that PPI shall acquire an additional park or
attraction by way of ownership, joint venture, or
management contract within the first two (2) years, and the
Film has not been distributed within a 250-mile radius of
such park or attraction, PPI's Licence shall extend to
such park or attraction for immediate exhibition. If
beyond the first two (2) years, such License shall extend
to the park or attraction regardless of proximate
exhibition. For purposes of this Agreement, however, PPI
shall be limited to two (2) acquisitions in addition to its
five existing theme parks; and
(c) PPI reserves the right to approve the license of the Film
to any other theme park in North America, said approval not
to be unreasonably withheld.
8. SLP agrees to the following non-revocable rights with respect to PPI:
(a) SLP shall give PPI the Right of First Refusal in the event
that a sequel or series of simulator films is contemplated
using the 7th Portal concept or characters, said right
involving an opportunity to match any third-party offer to
produce another Film -- even if previously rejected by PPI;
(b) SLP shall grant PPI the right to use "Walk-a-Rounds" based
on the characters and concept in its parks, and the right
to promote the 7th Portal through special events and
touring shows;
(c) SLP shall grant PPI a license to sell merchandise based on
the 7th Portal concept and characters in its parks, events,
and touring shows subject to a 5% royalty on the wholesale
cost of goods sold. Such merchandise licensing agreement
shall be negotiated separately, and is not a part of this
Agreement; and
(d) SLP shall grant PPI the right to use the 7th Portal brand
or concept in association with the naming of any ride or
attraction in a PPI Park.
PROMOTION & MATERIALS:
1. SLP shall make available reproducible art, printed material, and
marketing collateral to PPI with respect to the 7th Portal concept
and characters for the purpose of promoting the film. SLP will not
charge PPI for the use of the material, understanding that PPI would
incur the costs of mass-producing said material.
2. SLP shall promote the Film, its association with PPI, and PPI Park
locations on its website. PPI shall promote the Film and its
association with SLP on its websites.
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3. SLP agrees to provide the in-person services of Mr. Xxxx Xxx for
public appearances and press releases associated with the grand
opening of the Film in at least one (1) of the PPI Parks. Such
services shall be rendered at no cost, and upon PPI's reasonable
notice of such requirement. PPI will reimburse SLP for actual,
reasonable, and documented expenses associated with Xx. Xxx'x personal
appearances at the PPI Parks.
INDEMNIFICATION:
The Parties will indemnify each other with respect to any and all injuries
(or intellectual property disputes) that may arise out of this project.
The actual agreement will contain extensive indemnification terms and
provisions.
DISTRIBUTION:
1. The Managing Member shall arrange a distribution agreement with one or
more distributors ("Distributor") for the world-wide exploitation of
the Film. As a condition of such agreement, Newco shall use its best
efforts to cause Distributor to comply with the following
stipulations:
(a) During the year commencing March 15, 2001 (the "Initial
Year"), distributor shall not distribute the Film to a theme
park in the United States and Canada or to a stand-alone
simulation theater (i.e., outside a theme park) within a 250
mile radius of any Park or Additional Park without the
approval of PPI (it being agreed that any such distribution
is pre-approved for theme parks or stand-alones in the
following cities: Orlando, New York, Los Angeles, Seattle,
San Diego, Chicago, and Dallas);
(b) PPI reserves the right to approve the license of the Film to
any other theme park in North America, said approval not to
be unreasonably withheld;
(c) After the second year, Distributor may distribute the Film
to any stand-alone simulation theater, regardless of
location, and to theme parks in the aforementioned cities as
well as any theme park outside the 250-mile radius of the
Parks/Additional Parks; and
(d) PPI shall be entitled to a "Paramount Parks" and individual
credits (the form of which shall be approved by Newco prior
to such use) on one-sheets and other marketing materials and
approved merchandise items in connection with the exhibition
of the Film at the Parks.
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REVENUE PARTICIPATION:
1. The Parties agree to the following distribution of gross receipts
derived from the exhibition of the Film:
a) Xxxxx receipts received by or credited to the account of
Distributor in connection with its exploitation of the Film
("Gross Receipts") shall be disbursed as follows on a
continuing and cumulative basis:
i) First, Distributor shall retain 30% as a distribution
fee which distribution fee shall be inclusive of all
distribution expenses;
ii) Second, Distributor shall distribute the remaining
Gross Receipts, quarterly, to Newco; and
iii) Third, the Parties' Gross Receipts shall be distributed
quarterly by Newco to SLP, PPI, and Blur on a
first-dollar-out basis, in accordance with the schedule
attached hereto as Exhibit "C";
2. In connection with the Film's distribution, Distributor shall submit
financial reporting statements showing all revenue from the
distribution of the Film on a quarterly basis throughout the Term of
distribution. Newco shall have the right to audit Distributor's books
and records in connection with the distribution of the Film, the cost
of which shall be borne by Xxxxx. In the event that any audit shall
subsequently reveal a discrepancy of greater than 5% of the
information reported in the financial statements, then Distributor
shall bear the full costs of such audit as well as any funds owed.
