THE XXXXX GROUP-ENTERTECH PICTURE CORP
JOINT VENTURE FILM PROJECT
Xxxx Xxxxx and Xxxxxx Xxxx (collectively referred to hereinafter as "The Xxxxx
Group" or alternatively ("the Polans"), and EnterTech Picture Corp (hereinafter
referred to as "EnterTech"), have agreed to jointly finance and produce a
feature length digital video film, tentatively entitled "Level 9" ("the Film").
At times, EnterTech and The Xxxxx Group parties are referred to herein jointly
as "the Parties" or "the Investors".
The following shall set forth the agreed basic terms, conditions and
understanding of the Polans and EnterTech for this film project.
Production Budget of Film: Seventy Five Thousand U.S. Dollars ($75,000 USD).
Production Schedule and Anticipated Start Date: A two-week Shoot with an
anticipated Start Date of December 11, 1999, or as jointly agreed to by the
Parties.
Approvals: The Story Idea, Budget for $74,775 dated August 25, 1999, and the Key
Production personnel (Xxxxxxx Xxxxxxx Xxxxxx, Director; Xxxx Xxxxxxx, Line
Producer) are hereby Pre-Approved by the Parties. The Film shall be shot in
Digital Video of High Definition Digital Video and shall be approximately 95
minutes in length and receive an MPAA rating (if applicable) no more restrictive
than "R". The Parties acknowledge and consent to a fixed deferment of Twenty
Thousand Dollars ($20,000) to the Writer of the Screenplay if and only if the
Film's gross receipts paid to the Production Entity exceed the amount of
Recoupment plus Bonus and Overhead, plus all third-party gross determents. Bank
of America, Reno, Nevada, is hereby pre- approved by the Parties for all banking
purposes relating to the Film.
Production Entity: A Limited Liability Company, formed under and in accordance
with the Laws of the State of Nevada and with its own separate Federal Taxpayer
Identification Number, shall be formed to be the Production Entity for the
production of the Film. It is not anticipated at this time that the Production
Entity shall have any purpose other than the financing, producing and
exploitation of the Film. The selection of the name, address and domicile of the
Limited Liability Company shall be jointly approved by the Polans and EnterTech.
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Capital Contribution: Both The Xxxxx Group and EnterTech agree to each
contribute to the Production Entity the sum of Thirty Seven Thousand Five
Hundred U.S. Dollars ($37,500 USD) on a schedule as agreed to by both Parties.
In exchange for the agreed Capital Contribution made by each Party, the Party
shall each receive a fifty percent (50%) equity interest in the Production
Entity. The Capital Contribution shall be utilized by the Production Entity to
finance and product the Film. Once the respective Capital Contribution have been
made by both Parties, the monies shall thereafter be deemed the "Investment
Monies".
Handling of Investment Monies: All Investment Monies shall be placed by the
Production Entity into an interest-bearing Trust or Escrow Account until the
Total Cash Budget ($75,000) has been raised. If the $75,000 is not raised within
two months of the initial opening of the trust or escrow account and the
Investors do not unanimously elect at that time to proceed forward with the
Production of the Film with the monies then available, then all monies,
including any interest earned thereon, shall be returned by the Production
Entity to the Investors on a pro rata basis and the Production Entity dissolved,
at the option of either The Polan Group or EnterTech.
Once the Production has begun, the Investment Monies shall be placed into an
interest-bearing Production Account. Both the Trust or Escrow Account and the
Production Account shall be located at Bank of America, Reno, Nevada.
Also, once the Production has begun, the Story, the Screenplay, and all allied
literary rights, including the copyright of the Screenplay and the Film, shall
be in the name of the Production Entity, or held jointly by EnterTech and The
Xxxxx Group.
Operation of the Production Entity: EnterTech, and its individual directors,
owners and employees, will have the active responsibility to oversee the
operation of the Production Entity and the production and distribution of the
Film. Either Xxxx Xxxx or Xxxx Xxxxxx shall be the President or Chief Operating
Officer of the Production Entity and the books and records of the Production
Entity shall be maintained at EnterTech's place of business.
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EnterTech agrees that Xxxxxx ("Xxx") Polan, or another representative of The
Polan Group ("Representative"), may oversee the production of the Film and
approve disbursements and sign all checks issued from the Production Account for
the production of the Film if Representative is on set and available on a
full-time daily basis for the preproduction and production of the Film.
Representative shall be solely responsible for all of his or her food and living
expenses while providing such services.
If the Production of the Film costs less than $75,000, then any remaining
balance in the Production Account shall be divided evenly (50%-50%) between the
paid to EnterTech and The Xxxxx Group.
Representative shall have full and unrestricted access at all reasonable times
to all of the books, records, agreements and distribution, sales and licensing
agreements relating to the Film.
The Parties agree to confer and make decisions concerning the production of the
Film on an equal basis, with the understanding that in cases where, after
discussion, there is still a genuine difference in opinion, The Xxxxx Group will
generally defer to EnterTech's judgment on creative and production decisions
during production so long as those creative and production decisions do not
adversely affect financial matters.
Minimal Upfront Fees to Key Production Personnel: The Creative Team is quite
confident that it can make a high quality, financially profitable film for the
Total Cash Budget. The Key Production personnel (Writer, Director, Producers,
Line Producer) shall agree to receive minimal up-front compensation from the
Budget and defer any request for further compensation until after the Investors
have recouped all of their Investment plus received their full Bonus and
Overhead payment.
Distribution of the Film: It is also agreed that EnterTech, and/or Xxxx Xxxx,
individually, shall locate and arrange for the worldwide distribution, sales and
licensing of the Film. EnterTech shall submit all proposed marketing and
distribution expense and all proposed distribution, sales or licensing
agreements to Representative for The Xxxxx Group's approval before incurring
such expense or signing any such agreement. EnterTech is entitled to receive as
and for its distribution fees and sales and licensing commissions the sum of
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Page 4
fifteen percent (15%) of any and all such sales and licenses, after the
deduction of reasonable and mutually approved expenses. EnterTech agrees to
defer five percent (5%) of the agreed 15% until such time as there has been the
Recoupment of the Investment Monies ($75,000), plus a one-time Bonus and
Overhead Charge of Fifty Thousand Dollars ($50,000), payable to EnterTech and
The Xxxxx Group. After such recoupment and Bonus and Overhead have been paid in
full to EnterTech and The Xxxxx Group, EnterTech shall thereafter be entitled to
its full distribution, sales and licensing fee of fifteen percent (15%) from all
subsequent monies received from the exploitation and distribution of the Film
and the deferred and accumulated 5%.
Subdistribution shall be handled as follows:
A. Domestic Distribution (English-speaking North America)
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In the event that at any time EnterTech decides that it shall
subdistribute the Film through a non-related distribution or
sales entity for Domestic or North American territories or
rights, then EnterTech shall not be entitled to a distribution
of sales fee for any such sales of licenses obtained by the
subdistributor if the subdistributor receives a fee of 15% or
more.
B. Foreign Rights
--------------
EnterTech, or a related sales entity, shall act as the active
foreign distributor or foreign sales entity for the Film. For
providing such services, EnterTech, or its related sales
company, shall receive the above- described compensation of
15%. It is understood and agreed that EnterTech shall not
assign the active foreign sales or licensing activities to
another independent sales company, or representative, (e.g.,
Summit, Overseas Film Group, Xxxx Xxxxx, Xxxxxx Xxxxx, etc.)
without The Xxxxx Group's written consent. It is agreed that
any and all subdistribution agreements between EnterTech and a
subdistributor must contain an express written ceiling or cap
on allowable marketing and distribution expenses. EnterTech
agrees to consult with and obtain the approval of The Xxxxx X
xxxx before concluding any subdistribution agreement.
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Return of Investment Monies: All monies received by the Production Entity from
any sales or licenses of the Film from related or third party distributors,
sales agents or representatives shall go immediately into a separate
Distribution Account jointly selected by the Parties.
1. Recoupment plus Bonus and Overhead: The Bank shall Have written
instructions to place all monies in the Distribution Account into the Trust or
Escrow Account until such time as the Production Entity has recouped its entire
Investment of $75,000, plus the Bonus and Overhead Charge of $50,000. All such
monies coming into the T rust or Escrow Account shall be divided equally between
The Xxxxx Group and EnterTech. Therefore, the first $125,000 of monies received
in the Distribution Account from sales and licenses of the Film shall be placed
into the Trust or Escrow Account and shall hereinafter be referred to as
"Recoupment plus Bonus/Overhead."
2. Profits: Thereafter, all further monies received into the
Distribution Account after Recoupment plus Bonus/Overhead shall hereinafter be
called "Profits". The Bank, pursuant to its written instructions, shall divide
the Profits as follows: fifty percent (50%) to the Production Entity's Trust or
Escrow Account and fifty percent (50%) to the Production Entity's Production
Account for the benefit of the "Creative Team". Other than the previously
described $20,000 contingent deferment payable to the Write of the Screenplay,
all Profit Participation payable to the Lead Actors, the individual Producers,
Writers, Director, Production Designer, Special and Visual Effects Designer,
Composer, Director of Photograph, and all key Production personnel and other
Profit Participants other than the Investors shall be paid from the Creative
Team's share of the Profits, unless the Investors unanimously agree in writing
to contribute part of their share of the Profits to any Profit Participant.
Insurance: The Production Entity shall obtain all necessary policies of
insurance (general liability, workers compensation, errors and omissions, Key
Cast and Director's coverage) and name EnterTech and Xxxx Xxxxx and Xxxxxx
Xxxxx, or their designee[s], as Additional Insureds on all such policies.
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No Institutional Guarantee of Film Completion: Because of the very limited total
Cash Budget of the Film and the proportionately high cost of such insurance
policy, the Production Company shall make the Film without obtaining a Film
Completion Bond issued by a recognized Film Guarantor. However, EnterTech
unconditionally guarantees to The Xxxxx Group that the Film shall be completed
in a commercial manner within the $75,000 Budget and hereby agrees to pay for
any and all expenses and costs incurred in connection with the Film in excess of
$75,000 without further contribution from The Xxxxx Group. Distribution and
marketing expenses and costs, including the cost of transferring the Film from
video to 35mm film, are not included in the $75,000 Budget. It is recognized and
agreed that if The Xxxxx Group and EnterTech agree that the finished Film should
be transferred to 35mm film, then the Parties shall equally share on a pari
passu basis the costs of such transfer. If the Parties do not both agree to
transfer the Film to 35mm, then either Party has the right, but not the
obligation, to solely pay for the transfer to 35mm. The cost of such transfer
and all Print and Ad expenditures and related theatrical distribution expenses
and costs shall be recouped in a first position from theatrical revenues only.
If such distribution expenditures have not been fully recouped from theatrical
revenues, then the remaining balance shall be recouped from the revenues from
sales and licenses of foreign rights and ancillary rights after and only after
each of the Parties has recouped its original $37,500 investment.
Copyright of Film: The Production Entity shall register the copyright of the
Film with the United States Copyright Office in the name of the Production
Entity or jointly ibn the names of EnterTech and The Xxxxx X xxxx, or its
designee[s], as 50%-50% owners.
Film Credits: Xxxx Xxxxx and Xxx Xxxxx shall have the right to have their
respective names listed in the Main Credits of the Film as "Executive Producers"
and The Xxxxx X xxxx, or its nominee, shall receive a "Presentation Credit" in
the Film's opening credits. For example, "The Xxxxx Group and EnterTech (or Xxxx
Xxxx) Present "Level 9".
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Dissolution of Production Entity: The Production Entity shall be dissolved on
December 31, 2001. All monies remaining in or receivables owed to the Production
Entity at the time of Dissolution shall be divided equally into two parts: one
part for The Xxxxx Group, and the other part for EnterTech. Any monies later
becoming due to the Production Entity shall also be equally divided between the
Parties. Upon Dissolution, all assets of the Production Entity, including, but
not limited to, all receivables, the original Screenplay and all allied and
subsidiary literary rights, and all Sequel, Remakes and other such rights, will
be owned by the Parties equally as tenants in common.
Warranties and Representations: EnterTech hereby warrants and represents that it
now owns, or has the exclusive right to acquire for the Production Entity the
Screenplay and all related Literary Rights, and that there are no liens,
encumbrances or options against the Screenplay or Literary Rights. EnterTech
further warrants and represents that the Film shall cost no more than $75,000 to
complete, exclusive of the costs of transferring the Film to 35mm, Delivery
Items and Distribution Expenses, and therefore agrees to solely pay for any and
all production cost overruns.
The Production Entity shall obtain from the Writer of the Screenplay
his/her/their written representation and warranty that the Screenplay, story
idea and characters are his/her/their original work and that he/she/they will
indemnify and hold the Production Entity, EnterTech, Xxxx Xxxxx, and Xxxxxx
Xxxxx harmless (including the payment of all reasonable attorneys fees) from any
and all claims made against them by anyone claiming to have an interest in the
Screenplay or its allied rights.
Full Agreement of the Parties: The foregoing Agreement contains the basic terms
and conditions of the Parties' agreement and supersedes all previous
discussions, representations and agreements. Any and all Modifications or
Amendments to this Agreement must be in writing and signed by both Parties.
Joint Preparation of the Agreement: Both Parties acknowledge and agree that they
have obtained, or had the opportunity to obtain, the advice and counsel of their
own respective attorneys and advisors with respect to the language, terms and
EnterTech-The Xxxxx Group Agreement
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conditions of this Agreement, and that the Parties are deemed the joint drafters
of this Agreement for all purposes of construction and interpretation.
Additional Stock: As and for additional consideration for The Xxxxx Group's
Capital Contribution, EnterTech and Xxxx Xxxx, individually agree to give 5,000
shares of the Rule 144 restricted common shares of EnterTech Media Group
Incorporated to each Xxxx Xxxxx and Xxxxxx Xxxxx (for a total of 10,000 shares)
upon receipt of The Xxxxx Group's Capital Contribution to EnterTech for the
Film.
Dated this 17th day of November 1999 in Los Angeles County.
ENTERTECH PICTURE CORP THE XXXXX GROUP
By:/s/ Xxxx Xxxxxx By:/s/ Xxxx Xxxxx
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Xxxx Xxxxxx By:/s/ Xxxxxx Xxxxx
President -------------------
Leader of Group
