JOINT VENTURE AGREEMENT
This joint venture agreement is entered into as of October 1, 1995 by and
between Xxxxxx Entertainment Group, Inc. a California corporation (referred to
herein as "KEG") and Seagull Entertainment, Inc. a Deleware corporation
(referred to herein as "SE") which are collectively referred to herein as the
"Venturers".
NOW THEREFORE, it is mutually agreed by and between the above named Venturers as
follows:
1. Name and Purpose: The Venturers hereby form a joint venture (referred to
herein as the "Joint Venture") under the name XXXXXX XXXXXX ENTERTAINMENT for
the purpose of the production and/or worldwide distribution of television movies
and television series. The Venturers shall mutually agree in writing to each
project and/or property the Joint Venture shall undertake to produce and/or
distribute. The Venturers agree that the initial project is the production and
distribution of a new live action one hour television series based on the Tarzan
character created by Xxxxx Xxxx Xxxxxxxxx. Upon execution of this Agreement, the
Venturers shall sign and cause to be filed and published in the State of
California a certificate of fictitious business name or other appropriate
similar document indicating that the Joint Venture will be conducting business
under such name. SE shall be responsible for the domestic distribution and KEG
shall be responsible for the foreign distribution.
2. Place of Business: The Joint Venture's principal place of business shall
be 00000 Xxxxxxx Xxxxxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000. The principal place
of business may be changed from time to time and other places of business may be
established by actions taken in accordance with the provisions of this
agreement.
3. Name and Domicile of each Venturer: The name and addresses of each of
the Venturers is as set out below:
x. Xxxxxx Entertainment Group, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
b. Seagull Entertainment, Inc..
000 Xxxx Xxxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
3. The Term: The Joint Venture shall begin as of the date of this Agreement
and shall continue until such time as the purpose of the Joint Venture set forth
in Paragraph 1
hereof has been completely fulfilled or until dissolved by mutual written
agreement of the Venturers.
4. Capital: The capital required for the business of the Joint Venture
shall be contributed equally by the Venturers. No Venturer may withdraw capital
from the Joint Venture without the consent of the other Venturer. The Venturers
agree that the business philosophy of the Venture shall be that it shall receive
capitalization for the production Costs and distribution expenses of each new
project the Venture takes on from third party financial sources. The Venturers
agree that $500,OOO for the marketing and distribution of the new Tarzan two
hour premiere and series shall be taken in by the Venture from STI and that
thereafter each Venturer shall be responsible for an additional $50,OOO to cover
the distribution costs through February 28, 1996. The Venturers shall thereafter
fund the additional preapproved distribution costs (with a maximum of an
additional $900,000 or a total of $1,500,000) on a 50/50 basis unless same are
received from third party funding.
5. Gross Income to the Venture: All sales, licenses and any other source of
income derived from the projects and/or properties of the Joint Venture shall be
made only in the name of the Joint Venture. All expenses accrued on behalf of
the Joint Venture shall be made in the individual Venturers' names., ie, either
KEG or SE. Neither Venturer shall comingle any income or projects of the Venture
with any of their other projects or companies. The Venturers and their officers
shall fully disclose to each other any possible licenses or agreements of any
kind which might be comingled or in any way receive a benefit from a project
that is owned by the Joint Venture. Any rebates or commissions received by
either Venturer, or employees thereof, or a company controlled by either
Venturer shall be disclosed and become gross income to the Joint Venture even
though paid initially to one of the Venturers' other companies or employees.
6. Cash Distribution; Compensation: It is contemplated that the Venturers'
shall receive reasonable compensation for the services provided to the Joint
Venture as specified in the budgets for the projects, or otherwise as the
Venturers may agree. Gross Income received in the Joint Venture on the Tarzan
project shall be distributed monthly as follows:
1. Payment to each Venturer of the written preapproved costs and
expenses up to $600,000.
2. an equal division of the distribution fees which are charged by the
Joint Venture on the project shall be paid out to each Venturer on a 50/50
basis.
3. Reimbursement to the Venturers of each of their additional mutually
approved marketing and distribution expenses which shall be no greater than
an additional $900,000.
4. Reimbursement with STI on a pari passu basis with paragraph 6.3 of
their advanced marketing and distribution expenses.
5. Third Party profit participations (if any) due.
All production and distribution expenses allocated to the venture shall be
preapproved by both venturers and signed off on in writing on a monthly basis.
It is the intention of the Venturers that neither draw salaries for any officers
or employees nor pay their individual overhead expenses from the Joint Venture.
Both Venturers shall continue to pay all their own employee salaries and
expenses excluding travel, hotel and living expenses for the various trade
shows. As between the Venturers, approved sales trips can be submitted for
payment by the Venture, however, as between the Venturers, only coach class
shall be paid for sales trips and hotels at a maximum of $250.00 per night and
normal (non limo) transportation. Notwithstanding the above, as to 3rd parties,
all actually incurred travel, hotel and living expenses of the Venturers
including sales trips shall be charged as distribution expenses.
As between the Venture and 3rd parties, each Venturer shall be responsible for
any of its expenses which are disallowed under audit by a 3rd party.
Accordingly, any disallowed expenses shall be charged to that Venturer's account
until the matter is settled with the 3rd party. Said Venturer shall be solely
responsible to the third party for the disallowed expenses however the Venture
shall be able to keep an amount equal to the disallowed amount on the books as a
reserve and charge same to said Venturers account until the matter is resolved.
It is the intention of the Venturers that each Venturer incurs their approved
portion of expenses in their separate corporate name identity. Accordingly all
approved expenses incurred by KEG shall be billed to KEG and paid by said
corporation and all approved expenses incurred by SE shall be billed to SE and
paid by said corporation. In the event that an expense billed to either Venturer
involves a Joint Venture project and a non joint Venture project, the Venturer
shall so designate on the invoice and a mutually agreed upon apportionment
between the projects shall be made.
Cash distributions and compensation on any additional new projects of the Joint
Venture shall be agreed upon in a subsequent agreement signed by the Venturers.
7. Allocation of Profits. Losses and Taxes: (a) The net profits or net
losses of the Joint Venture shall be allocated, credited or charged as the case
may be, to the Venturers in equal shares of fifty percent (50%) each. The terms
"net profits" and "net losses" as used in this Agreement shall be defined as
gross receipts received by the Joint Venture from any and all sources in
connection with Joint Venture projects less the aggregate of all preapproved
costs and expenses of the Joint Venture incurrd by each Venturer, less a 50/50
split of the distribution fees and less third party gross or net profit
participations. For purposes of computing the Joint Venture's net profits and
net losses only the costs and expenses preapproved by both of the Venturers and
incurred by either Venturer
directly on behalf of the Joint Venture projects shall be charged and shall
reduce the gross receipts of the Joint Venture in calculating the Joint
Venture's net profits or net losses.
(b) Any and all tax credits and/or deductions to which the Joint Venture
shall become entitled shall be allocated equally between the Venturers in shares
of fifty percent (50%) each or taken directly by the Joint Venture if the
Venturers so decide.
8. Management and Joint Venturer Responsibilities: The Venturers shall have
equal control over all the creative, financial aspects of the development,
production and distribution of the projects selected to be produced and/or
distributed by the Joint Venture. In the event of a deadlock disagreement
regarding creative decisions, the Venturer who brought the project and/or
property to the Joint Venture shall have final creative control. In the event of
a deadlock disagreement regarding financial, legal and/or business decisions,
either Venturer can immediately schedule a mediation (the mutually approved
mediator selected must be a former judge) which will be paid for by the Joint
Venture and which decision shall be binding on the Joint Venture and both
Venturers agree to be bound by same.
9. Books, Records and Bank Accounts: (a) The Joint Venture shall at all
times throughout its existence, keep or cause to be kept, at the principal place
of business of the Joint Venture or at such other place as the Venturers' may
determine, books and accounting records for the business and operations of the
Joint Venture. Such books shall be open to inspection by the Venturers, or their
authorized representatives, during reasonable working hours. The accounting for
the Joint Venture's purposes, including the determination of the Joint Venture's
net profits shall be in accordance with generally accepted accounting principles
consistently applied. The Joint Venture shall engage the services of a CPA who
shall be selected with the mutual approval of both Venturers.
(b) There shall be maintained for each Venturer a capital account and an
income account. Each Venturer's distributive share of profits and losses, and
monthly and end of year withdrawals not previously posted shall be credited or
debited to the respective Venturer's income account as of the close of the
calendar year. Thereafter, any debit or credit balance remaining in the income
account of a Venturer shall be debited or credited as the case may be to its
respective capital acount.
(c) The Joint Venture shall be on a calendar year basis for accounting
purposes (the Joint Venture's Fiscal Year). As soon after the close of each
fiscal year as is reasonably practicable, a full and accurate accounting shall
be made of the financial affairs of the Joint Venture as of the close of each
such fiscal year. When such accounting and accounting statement is made and
provided to the Venturers, the net profits or the net loss sustained by the
Joint Venture during such fiscal year shall be ascertained and creditd or
charged as the case may be in the books of account of the Joint Venture in the
proportions hereinabove specified.
(d) From time to time, but no less than quarterly, the Venturer shall make
distributions from the capital of the Joint Venture which shall be in excess of
the reasonable needs of the Joint Venture for working capital and reserves as
mutually determined by the Venturers, provided however that so long as any
Venturer has any indebtedness or other outstanding obligation to the Joint
Venture, any distribution that would otherwise be made shall first be applied
toward any such indebtedness or other obligation.
(e) All funds of the Joint Venture shall be deposited into any account or
accounts in the name of the Joint Venture at such bank or banks as may from time
to time be selected by the Joint Venture. All withdrawals from any such account
or accounts shall be made by check or other written instrument which shall
require the signature of a representative of each Venturer.
10. Outside Activities Permitted: It is the intention of both of the
Venturers that they each continue their other ongoing businesses. The Venturers
may engage in or possess an interest in any other business venture of every
kind, nature and description, including ventures or enterprises which may
compete with the Joint Venture and neither the Joint Venture or the other
Venturer shall have any rights in said business ventures or to the income or to
the profits derived therefrom. No Venturer shall be obligated to offer any
business opportunity to the other Venturer or to the Joint Venture. Each
Venturer hereby waives any right it may have against the other Venturer for
capitalizing on information learned as a consequence of its connection with the
affairs of the Joint Venture.
11. Contracts and Agreements: All contracts and agreements must be signed
by each of the Venturers or preapproved in writing by the non signing Venturer.
If any contract or agreement is entered into by a Venturer without the written
consent of the other Venturer, the Venturer purporting to enter into such
unauthorized contract on behalf of the Joint Venture shall indemnify and hold
harmless the non contracting Venturer from all claims, liabilities, damages and
costs arising out of or pertaining to such unauthorized contract.
12. Time Commitment and Exclusivity: The Venturers agree that each Venturer
shall devote as much time as shall be reasonably necessary to fulfill its duties
and obligations in connection with the Joint Venture subject, however, to their
availability. The Venturers and the time, skill and effort of their respective
principals shall not be exclusive to the Joint Venture and each Venturer may
develop other entertainment related properties and projects and engage in other
similar activities in the entertainment and communications industries separate
and apart from the Joint Venture and the other Venturer.
13. Title to the Properties: Any and all property and assets of the Joint
Venture as well as all intangible rights, including without limitation
distribution rights, copyrights, trade names and trademarks, the productions
themselves and all other forms
of exploitation of the projects and/or properties and all ancillary,
merchandising, music and book publishing rights which can contractually be owned
or controlled by the Joint Venture shall be owned or controlled by the Joint
Venture and title shall be held in the name of the Joint Venture whenever
contractually possible. KEG hereby licenses to the Joint Venture the right to
use its color logo illustration in print and tape, however KEG shall retain the
ownership rights therein.
14. Property Rights Contributions: KEG is facilitating the licensing to the
Joint Venture of the following property rights:
(a) The exclusive license to produce and distribute one (1) new one hour
Tarzan live action television series under a master agreement American First Run
holds with Xxxxx Xxxx Xxxxxxxxx, Inc.
The Joint Venture acknowledges the limited and specific rights granted are
only those that American First Run may license and the Joint Venture accepts
said license subject to all the terms and conditions of the master license
agreement with Xxxxx Xxxx Xxxxxxxxx, Inc. and agrees to assume all the
obligations and be contractually bound by all its terms and conditions. The
rights granted shall not be an assignment, but rather a license and
notwithstanding anything contained to the contrary, American First Run shall
retain final control over the Tarzan property and its use as between American
First Run, KEG and the Joint Venture. The copyright of the series, pursuant to
the master agreement with Xxxxx Xxxx Xxxxxxxxx, Inc. shall remain in the names
of Xxxxx Xxxx Xxxxxxxxx, Inc. and American First Run. The current master
agreement and all its amendments are attached hereto and marked Exhibit "A". In
the event that AFR's master license agreement is enlarged to include additional
licenses to other Xxxxxxxxx literary properties, (i.e. The Tales of Xxxxx Xxxx
Xxxxxxxxx- a series of 2 hour television movies or the Venus series of books,
etc.) the Joint Venture shall simultaneously receive a license to produce and
distribute under the same terms and conditions as above.
Immediately subsequent to the creation of this Joint Venture, KEG shall
facilitate the execution of a license agreement between AFRS and the Joint
Venture.
The Venturers acknowledge that Xxxxxxx X. Xxxxx Television Enterprises has
claimed it should be involved in the new series because of its involvement in a
previous Tarzan half hour series and regardless that it is KEG's contention that
said claim is without basis, KEG is facilitating the licensing of the property
to the Joint Venture with said claim in existence.
(b) All projects and/or properties contributed by either Venturer to the
Joint Venture shall revert to the contributing Venturer in the event that
financing or official preproduction has not commenced within one year from the
date of the contribution.
15 Warranties: Each Venturer hereby warrants and represents to the other
that it:
(a) Has the right and capacity to enter into this Agreement
(b) Shall not encumber or sell any property, assets or intangible
rights of the Joint Venture without the written consent of the other
Venturer.
(c) Shall not assign, mortgage, hypothecate or encumber its interest
in the Joint Venture without the written consent of the other Venturer.
(d) Shall not loan any funds or extend the credit of the Joint Venture
to any person or entity without the written consent of the other Venturer.
(e) Shall not incur any cost, expense, liability or obligation in the
name or on the credit of the Joint Venture without the written consent of
the other Venturer, and
(f) Shall not draw any checks on the Joint Venture without the
signature of an authorized representative of both of the Venturers.
16. Indemnification: Each Venturer hereby indemnifies and holds harmless
the other Venturer from and against any and all claims, liabilities, damages and
costs (including but not Limited to reasonable attorney's fees and court costs)
arising from any breach by such Venturer of any representation, warranty or
agreement made by such Venturer pursuant to this Agreement.
17. Dissolution and Termination: (a) The Joint Venture shall be dissolved
and terminated and its business wound up upon the first to occur of the
following:
1. The expiration of the term referred to in Paragraph 3 above;
2. The mutual agreement of the Venturers;
3. Operation of law; or
4. A material breach of this Agreement by either Venturer, if such
breach is not cured within 15 days after written notice thereof has been
provided to the breaching Venturer by the non-defaulting Venturer. Only the
non-defaulting Venturer shall have the right to terminate the Joint Venture
pursuant to this paragraph. Such termination shall not release the
defaulting Venturer from any obligations or liabilities to the other
Venturer, whether pursuant to the provisions of this agreement or a law or
in equity.
(b) Upon termination of the Joint Venture, the business of the Joint
Venture shall be wound up and assets and projects and properties of the Joint
Venture shall be liquidated. Upon the happening of any one of the events of
dissolution mentioned above, the Joint Venture shall engage in no further
business, other than that necessary to protect the assets of the Joint Venture,
wind-up its business and distribute its assets as provided for herein.
18. Miscellaneous Provisions:
(a) All notices which either Venturer wishes to serve on the other shall be
in writing and certified mailed to the other Venturer.
(b) Mediation--the Venturers agree that in the event of a financial, legal
or business dispute, they shall submit the matter to mediation (mediator to be
selected must be a former judge) and the Joint Venture and each Venturer shall
be bound by same.
(c) Applicable law--This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the state of California.
(d) Written Amendment--This Agreement may not be amended or changed except
by written instrument duly executed by each Venturer.
(e) Assignments--No Venturer shall sell, assign, mortgage, hypothecate or
encumber its interest, or any portion thereof, in the Joint Venture without the
prior written consent of the other Venturer.
(f) Illegal Provision--Nothing contained in this Agreement shall be
construed so as to require the commission of any act or the payment of any
compensation which is contrary to law or to require the violation of any guild
or union agreement applicable hereto which may, from time to time be in effect
and by its terms controlling of this Agreement. If there is any conflict
between any provision of this Agreement and any such applicable law or guild or
union agreement and the latter shall prevail,, then the provision or provisions
of this Agreement, affected shall be modified to the extent (but only to the
extent) necessary to remove such conflict and permit such compliance with law or
guild or union agreement
(g) Waiver--No waiver by either Venturer of any failure by the other
Venturer to keep or perform any covenant or condition hereof shall be deemed a
waiver of any preceeding, or succeeding breach of the same or any other covenant
or condition.
(h) Additional Documents--Each Venturer shall execute and deliver any and
all additional papers, documents and other instruments and shall do any and all
further acts and things reasonably necessary in connection with the performance
of its obligations hereunder to carry out the intent of the Joint Venture.
(i) Entire Agreement--This Agreement contains the sole and only agreement
of the Venturers relating to the Joint Venture and correctly sets forth the
rights, duties a obligations of each of the other as of the date of such
Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of the date and year first
above
written at Los Angeles, California.
XXXXXX ENTERTAINMENT GROUP, INC. SEAGULL ENTERTAINMENT, INC.
A California corporation A Delaware corporation
BY: /s/ ILLEGIBLE BY: /s/ ILLEGIBLE
-------------------------------- -----------------------------
Authorized Signator (Pres.) Authorized Signator (Pres.)
