EXHIBIT 10.4
Xxxxx Dead, Inc.
0000 Xxxxxxx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
December 1, 2002
Xxxx Xxxxxxxxx
The Callamaro Literary Agency
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxx, Esq.
Loeb & Loeb LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Re: "Xxxxx Dead" - Apologetic Productions, Inc. (f/s/o Xxxxx Xxxx) - DEAL
MEMO
Dear Xxxx and Xxxxx:
Below please find the principal terms of the agreement between Xxxxx Dead,
Inc. ("Company") and Apologetic Productions, Inc. (Fed ID# 00-0000000)
("Lender") for the services of Xxxxx Xxxx ("Xxxx") in connection with the
theatrical motion picture currently entitled "Xxxxx Dead" (the "Picture").
This agreement shall be referred to herein as the "Deal Letter," and
Lender and Xxxx shall be referred to herein, individually and
collectively, as "Producer."
1. Conditions Precedent: Producer's obligations hereunder are subject to
the satisfaction of all of the following:
a. Signature and delivery of this Agreement by Producer and
Company;
b. Producer's approval of the specific amount of money to be
raised as financing for (i) the budget of the Picture; and
(ii) additional costs and funds to be available in connection
with the project;
c. Producer's receipt of stock certificates of Company; and
d. Producer's approval of the budget of the Picture. As of
February 25, 2003, the tentative budget of the Picture is
approximately $6.1 million, and remains subject to adjustment
and Producer's approval.
2. Fixed Producing Fee: Fixed Producing Fee shall be $150,000. The Fixed
Producing Fee shall be payable to Lender on a customary 20/60/10/10% basis over
pre-production/principal photography/delivery of Director's first cut/delivery
of the answer print (with the pre-production and principal photography payments
made in approximately equal weekly installments).
3. Contingent Compensation: Company shall issue to Producer 270,000 shares
of Company's common stock as "founders' stock" upon payment by Producer of the
sum of $270.00 (i.e., $.001 per share) (which issuance shall be as soon as
practicable). The aforesaid price per share shall be the same as that of the
"founders' stock" issued to the other founders of Company. Producer's 270,000
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total shares of common stock will represent 30% of the common stock outstanding.
In addition, Lender shall be entitled to receive participation (the
"Participation") equal to 3.75% of 100% of the "Adjusted Gross Receipts" derived
from the Picture. As used herein, "Adjusted Gross Receipts" means 100% of the
gross receipts derived by Company (including any parent, affiliate and
subsidiary) from the distribution and exploitation of the Picture (including any
and all ancillary rights therein), less Company's actual, direct, out-of-pocket
expenses in connection therewith. The definition of Lender's Participation shall
be no less favorable than the definition of the participation (however
denominated) payable to any other person or company granting rights or rendering
services in connection with the Picture. For the avoidance of doubt, except to
the extent necessary to set up a reserve to cover reasonably anticipated ongoing
operating expenses for Company, including, without limitation, payment of legal
and accounting fees, office expenses and the like, Company shall not be entitled
to charge distribution, sales, administrative or other fees on the revenues
derived from the Picture and/or any ancillary rights therein, nor shall Company
be entitled to charge overhead or any other indirect or similar cost (whether
set forth in the budget for the Picture or payable out of the revenues derived
from the Picture) without Producer's prior written consent. Subject to the
foregoing, Adjusted Gross Receipts shall be defined as set forth in Exhibit A
("Short Form Definition of Participant's Net Profits") attached hereto; and
Company represents and warrants that the definition set forth on Exhibit A is
and shall remain applicable to all persons and companies receiving a
Participation in the revenues derived from the Picture (i.e., no one shall
receive a more favorable definition).
4. If Producer resigns as Producer of the Picture (other than for
Company's breach) or is terminated by Company for "cause" (including Producer's
death or disability) prior to the completion of his duties, her Participation
shall be reduced; and a portion of her 270,000 shares of common stock shall be
subject to Company's re-purchase at a nominal fee of $.001 per share as set
forth below. Producer shall be deemed to be vested for (and remain entitled to
receive) that percentage of Producer's Participation and shall be entitled to
retain that percentage of her 270,000 shares of common stock that equals the
percentage of the Fixed Producing Fee that shall have accrued in accordance with
Paragraph 2 above prior to the date that Producer resigns or is terminated (as
aforesaid).
It is the intention of Producer and Company to establish a mutually
approved third party Collection Account into which all revenues derived
from distribution and exploitation of the Picture and ancillary rights
therein by the distributors and licensees of the Picture and said
ancillary rights shall be irrevocably directed, to pay the parties hereto
acknowledging that the agreement of third party financiers will be
required in connection therewith.
5. Start Date/Exclusive Services: The designation of the start date shall
be subject to the mutual approval of Company and Producer. Producer's services
shall be exclusive commencing eight (8) weeks prior to the scheduled start date
through completion of Principal Photography; and at all other times Producer's
services shall be rendered on a non-exclusive basis through delivery of the
final answer print of the Picture.
6. Pay-or-Play: Producer shall become pay-or-play for the Fixed Producing
Fee upon (1) mutual approval of the final direct cost budget and the final
production schedule, (2) mutual approval of the script (Company and Producer
acknowledge approval of the current draft by writer/director Xxxxx Xxxxxx dated
as of June 11, 2001), and (3) Company's securing of financing (including a
completion bond). Notwithstanding the foregoing, Producer shall become
pay-or-play not later than at such time as any cast member becoming pay-or-play
or upon commencement of pre-production of the Picture, whichever is earlier. If
Company has not secured 100% of the financing of the Picture within 90 days of
the Company's Initial Public Offering being declared effective by the Securities
and Exchange Commission ("Effective Date"), Producer shall have the option to
renew this Agreement for an additional 90 days. If the Producer decides not to
renew this Agreement, or if the Company has not secured 100% of the financing of
the Picture within the renewal period (i.e., 180 days after the Effective Date),
than any and all rights previously held by the Producer in connection with the
Picture shall revert to Producer, and
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Producer shall have no further obligation to Company hereunder. Additionally,
unless and until Producer is made "pay-or-play", Producer shall be free to work
for third parties and/or take another job.
7. Approvals, Consultations and Controls:
e. Cast - Producer shall have meaningful consultation as to the
selection of principal and key supporting cast. Company and
Producer acknowledge approval of Xxxxx Xxxxx in the lead male
role of "Xxx Xxxxxxx". Notwithstanding Producer's approval
rights, the parties acknowledge and agree that the engagement
of the personnel (and replacements thereof as applicable)
designated by Director hereunder shall be subject to the
budgetary parameters for such personnel as approved pursuant
to Paragraph 1.
f. Key Crew - Producer shall have meaningful consultation over
key crew (including replacements thereof) including but not
limited to the composer, casting director and all department
heads. Notwithstanding the foregoing, the following individual
is pre-approved by Company and Producer: (i) Xxx Xxxxxxxx, as
director of photography. Notwithstanding, Producer's approval
rights in this Paragraph 6, the parties acknowledge and agree
that the engagement of the personnel (and replacements thereof
as applicable) hereunder shall be subject to the budgetary
parameters for such personnel as approved pursuant to
Paragraph 1.
g. Locations - Producer shall have meaningful consultation over
principal shooting locations. Notwithstanding Producer's
approval rights in this Paragraph 6, the parties acknowledge
and agree that the locations designated hereunder shall be
subject to the budgetary parameters of the Picture approved
pursuant to Paragraph 1.
h. Approval of Distribution Deal - Producer shall work in
consultation with the Picture's other principal Producer(s),
in order to recommend to the Company any distribution deals
for the Picture with a third party licensee or purchaser.
"Producer" in this context shall mean only those persons
credited as "Produced by" on the film, and not `associate
producers,' `executive producers,' or other similarly credited
personnel. The parties acknowledge and agree that the final
management approval of any such distribution recommendation
must be made by the Company in accordance with Delaware Law
and the Company's charter. Collectively, Producers shall have
the exclusive right to make any such distribution
recommendations to the Company, and the Company agrees not to
enter into any distribution deals without such
recommendations. Company (and its domestic distributor) shall
meaningfully consult with Producer with respect to the initial
US theatrical advertising campaign and release pattern
(subject to the exigencies of distribution) and with respect
to the exhibition of the Picture at film festivals.
8. Credit: Subject to Producer completing all material producing services
hereunder, (i) "Produced By" credit on screen in the main titles, and in paid
ads (billing block portion), with size and excluded ads tied to the director,
shared with Xxxxx Xxxxxx in first position, Producer in second position, and no
other person(s) accorded individual "Produced by" credit; (ii) production credit
substantially in the form "A Mockingbird Picture", above the title and in first
position amongst all production company credits on screen in the main titles,
and in paid ads (billing block portion), size and excluded ads restrictions tied
to any and all other production company credits and the director's "film by"
credit. In the event that any cast member, Company and/or any production company
is accorded credit (including, without limitation, a presentation credit to a
financier or distributor) in the artwork portion of any paid or excluded
advertising, then Producer shall receive her production credit in the artwork
portion of such paid or excluded advertising in the same size.
9. Office and Assistant/Trailer: Company to provide Producer with an
exclusive office and an exclusive assistant for Producer's use while rendering
exclusive services. During the period of
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Producer's post-production services, said office and assistant may be shared by
Producer and Xxxxx Xxxxxx until delivery of the final answer print of the
Picture. Company shall provide a trailer for Producer while on location which
shall be of first-class quality, subject to budgetary parameters and location
exigencies.
10. Travel and Expenses: If Producer is required to travel more than 50
miles outside of the Los Angeles area, then Company shall provide Producer with
travel and expenses to be negotiated good faith as permitted in the Budget;
provided, however, no other individual rendering services in connection with the
Picture shall receive more favorable travel expenses than Producer without
Producer's approval.
11. Video/DVD/35mm Print: Provided Producer executes Company's standard
use-restriction letter, then if and when commercially available, Company shall
provide Producer with five (5) videocassettes and five (5) DVDs of the Picture,
for her personal use only.
12. First Opportunity Rights for Subsequent Productions: Subject to
standard terms and conditions to be negotiated in the long form agreement
pertaining to this first opportunity right, Producer shall have the right of
first opportunity to produce any and all derivative projects (i.e., projects
based in whole or in part on the Picture or the screenplay therefor), including,
without limitation, any theatrical sequel, prequel or remake (either, a
"Subsequent Theatrical Production"), and any television pilot, mini-series or
movie-of-the-week (either, a "Subsequent TV Production"). Company shall
negotiate in good faith with Producer for her producing services for the first
Subsequent Theatrical Production upon financial terms for her producing services
no less favorable than the financial terms hereunder for her producing services
for the Picture, and any agreement for either the initial Subsequent Theatrical
Production or Subsequent TV Production shall contain a provision substantially
similar to this.
13. Insurance: Producer shall be covered as an additional insured on
Company's errors and omissions insurance policy and under a general liability
insurance policy in connection with the Picture.
14. Premieres: Provided the Picture is completed with Producer and she is
not in material breach, Producer and her non-business-related companion shall be
invited to all United States celebrity premieres (if any) of the Picture and all
domestic and international film festivals in which the Picture is to be
screened. If any of said premieres are more than 50 miles from Producer's then
permanent residence, then with respect to one (1) such premiere (of Company's
choice), Producer shall be entitled to first-class round trip transportation for
Producer and her non-business-related companion, a first class hotel room for
one night and a per diem to be negotiated in good faith (but in no event less
than any actors who attend such premiere). With respect to any said festivals
which are more than 50 miles from Producer's then-permanent residence, Company
shall use its best efforts to cause the distributor of the Picture in the
territory where said festival is occurring to provide the foregoing first-class
round-trip transportation for Producer and her non-business-related companion
and the same first-class hotel room and an appropriate per diem as set forth
above for the appropriate number of nights shall, at a minimum, include such
provisions in any distribution agreement covering the United States and each of
the major European territories (including a provision requiring that Producer
receive no less favorable transportation, accommodation and expense provisions
than any actors who attend such festival).
15. Non-Liability of Producer/Company Indemnification of Producer: As a
material condition of Producer entering into this Agreement, Company hereby
acknowledges and agrees that, except as set forth in Paragraph 15 below (where
Lender is obligated to defend and indemnify Company), Company shall defend and
indemnify Producer in connection with any and all claims arising from the
development, financing, production, distribution and exploitation of the
Picture. Company acknowledges that the Producer is an employee for hire of
Company and shall have no liability or obligation with respect to any third
party claims arising in connection with the Picture. Company shall establish a
legal contingency fund of a minimum of $100,000 to cover any legal costs and
expenses in connection with third party legal claims or otherwise, and Company
will maintain E&O and General Liability.
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16. Warranty and Indemnification: Lender agrees to indemnify Company, its
successors, assigns, licensees, employees and agents and hold them harmless from
and against any and all claims, liabilities, losses, damages, costs and expenses
(including reasonable outside attorneys' fees), judgment, penalties arising out
of the breach by Lender of any representation, warranty or covenant made under
this Deal Letter.
17. Formal Agreement/Governing Law: The parties contemplate that they
shall enter Into a long-form agreement (including Company's Standard Terms and
Conditions and Exhibit Defined Proceeds) (the "Long-Form Agreement") for
Producer's services which shall include terms and conditions customary in the
theatrical motion picture industry, to be negotiated by the parties in good
faith. Until the Long-Form Agreement has been executed by the parties (at which
time it shall supersede this Deal Letter), this Deal Letter shall represent the
complete understanding of the parties and constitute the binding agreement
between them to be construed and governed in accordance with the laws of the
State of California applicable to contracts negotiated, executed and wholly to
be performed therein, without regard to principles of conflicts of laws.
2. Should the foregoing meet with your approval, please have Xx. Xxxx sign
in the space provided below.
Sincerely,
/s/ XXXXXXX X. XXXX III
------------------------------------
(Xxxxxxx X. Xxxx III)
XXXXX DEAD, INC.
AGREED AND ACCEPTED:
Apologetic Productions, Inc.
(f/s/o Xxxxx Xxxx)
Federal ID# 00-0000000
By: /s/ XXXXX XXXX
--------------------------
(Xxxxx Xxxx)
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EXHIBIT A
Short Form Definition of Participant's Net Profits
Participant shall be entitled to 7.5% of 100% of "Producer's Net Profits," which
shall mean 50% of the amount of "Gross Receipts" (defined below) remaining, if
any, after deducting therefrom the sum of all capital raised by Xxxxx Dead, Inc.
in connection with (a) its Initial Public Offering of Class A Preferred Stock;
and (b) any additional financing, distribution, or overhead costs (overhead
costs capped at 10% of the returns) incurred by Xxxxx Dead, Inc. in connection
with The Picture. "Gross Receipts" shall mean all cash revenues actually
received in U.S. currency by Xxxxx Dead, Inc. that are directly attributable to
The Picture. Each payment hereunder shall be made within 30 days of the end of
each calendar quarter, accompanied by an accounting statement setting forth the
calculation thereof. Participant's representatives shall have the right to audit
the books and records of Xxxxx Dead, Inc. at any time as to the calculation of
Net Profits. In no event will the definition, calculation or payment of Net
Profits to Participant be less favorable than that provided to any other
participant.
N.B. that 7.5% of Producer's Net Profits is the equivalent of 3.75% of "Adjusted
Gross Receipts" as defined in the attached Deal Letter.
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