EXHIBIT 10.19
IGNITE LLC / LIONS GATE FILMS, INC.
IGNITE FILMS / DEVELOPMENT FUND - DEAL MEMO
FEBRUARY 15, 2001
The following shall confirm the terms and conditions of the
Agreement between Lions Gate Films, Inc., its subsidiaries,
successors and affiliates (the "Company") and Ignite LLC ("Ignite
LLC") with respect to Ignite Films ("Ignite Films") and its
development fund.
1. IGNITE FILMS. Ignite Films will operate as a division of
the Company at Company's option. Ignite Films will develop
and produce theatrical-level films (as such term is commonly
used in the entertainment industry) for the Company, if the
Company determines to utilize Ignite Films, otherwise all
production may be under the Company or another of its
subsidiaries.
a. STAFFING. Company will establish Ignite Films as a
"Label". "Label" shall mean a brand under which Lions
Gate may elect to produce any given picture. Ignite
Films will be staffed as follows: Xxxx Xxxxx ("Butan")
will serve as as President of Ignite Films and Xxxxx
Xxxxxxxxx ("Xxxxxxxxx") will serve as Vice President of
Ignite Films provided that Company decides to utilize
it in a production capacity. If Company determines not
to utilize Ignite Films for production, then in that
event Butan will serve as an Executive Vice President
of Production of Company and Xxxxxxxxx as a Vice
President of Production of Company. Xxxxx and
Xxxxxxxxx shall share one assistant. Company will
employ Xxxx Xxxxxx as Director of Development of Ignite
Films or Company, as it may be determined through May
31, 2001 at a salary of $3,333.33 per month. As a
condition precedent to this Agreement, Company will
execute: (i) a two-year employment agreement with
Xxxxx and (ii) a one-year agreement with Xxxxxxxxx.
Butan shall report to the President of Production,
currently Xxxxxxx Xxxxxxxxx; Xxxxxxxxx shall report to
Butan. All employees of Ignite Films will be exclusive
to the Company, except as set forth herein or within
employee's contracts with the Company. Except as set
forth herein, all results and proceeds of the work of
Ignite Films and its employees shall be the property of
the Company.
b. OPERATIONS. Ignite Films shall be operated pursuant to
guidelines imposed by the Company.
c. PRODUCTION. Ignite Films shall produce each Picture
produced hereunder as instructed by the Company in all
matters, including those involving artistic taste and
judgement.
2. DEVELOPMENT FUND. Ignite LLC will contribute $500,000 to a
"replenishing" development fund (the "Fund") for the benefit
of the Company. Monies from the Fund shall be used to
finance the cost of acquiring, optioning or developing
ideas, concepts, literary or dramatic material or properties
(collectively, "Material"; individually, a "Project") for
possible production as a theatrical motion picture.
a. MECHANICS. A Writers Guild signatory (or such other
appropriate entity) of the Company shall serve as the
entity acquiring or optioning all Material acquired or
optioned by monies from the Fund. An amount equal to
the Fund's actual third party costs in connection with
a Project, plus interest (at the Prime Rate plus 1%)
shall be paid to the Fund by Company (or Company's
production entity) no later than the first day of the
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Project's principal photography. Upon such payment,
such amount shall "replenish" the Fund (i.e. such
amount shall serve to increase the balance of the
Fund). The bank account for the Fund shall be set up by
Company at Union Bank. Company shall provide regular
accountings in connection with the Fund. If the Fund
does not have sufficient monies to engage in the
development of a project, which project both Company
and Ignite desire to develop, then with the consent of
Company and Ignite, Company may advance such necessary
monies and recoup from Producer fees payable to Ignite
Shareholders.
b. ACCESSING THE FUND. The Fund's cash shall be kept in
an separate interest-bearing joint account of Ignite
LLC and the Company. Accessing the Fund will require
the mutual approval of designated representatives of
the Company and Ignite LLC. The Company hereby assigns
Xxxxxxx Xxxxxxxxx as its representative and Ignite LLC
hereby assigns Xxxx Xxxxx as its representative.
c. FEES TO IGNITE LLC. Any Project optioned, acquired or
developed by the Fund and subsequently produced by the
Company shall result in: (i) a fee equal to $150,000
being paid to Ignite LLC, on a 20/60/10/10 basis,
increasing at a rate of 15% per project produced
hereunder on an annual basis (February to February with
increase based on the basic $150,000 such that it goes
to $172,500 and then $195,000) with the fee reverting
back to $150,000 at the beginning of each succeeding
year, and (ii) contingent compensation to Ignite LLC
equal to 15% of Lions Gate's Adjusted Gross Receipts
(All gross revenues received by or credited to Lions
Gate, its parent, affiliates and subsidiary companies
arising from the exploitation of the Project in any and
all media (now known or hereafter devised) after
deduction by Lions Gate on a continuous basis of (i)
distribution fees calculated as follows: 25% of U.S.
Gross receipts and 25% of foreign receipts (provided
that if Lions Gate engages a third party distributor
with respect to any foreign territory, in no event
shall the aggregate distribution fees exceed 35%); (ii)
all actual third party out-of-pocket distribution
expenses (including a reasonable reserve for guild
residuals) plus actual interest thereon; (iii)
recoupment of Lions Gate contribution to the negative
cost of the Project (i.e. all costs related to the
development and production of the Project, specifically
excluding overhead charges or allocations) plus actual
interest thereon; and (iv) all other mutually approved
deferments paid to third parties.) Ignite LLC shall
receive fees and contingent compensation on any
subsequent production based on any Project as set forth
above. Notwithstanding the foregoing, on any Project
with a budget less than $3.0 million, the parties
hereto agree to negotiate Ignite LLC's fee in good
faith. The Producer fees are for the exclusive benefit
of Ignite LLC's shareholders.
d. RECOUPMENT OF COSTS BY COMPANY. Company shall be
entitled to a $200,000 fee on any Project produced
hereunder. In addition, Company shall be entitled to be
reimbursed $216,667 from the first Producer fees
payable to Ignite LLC hereunder.
3. CURRENT PROJECTS.
a. CURRENT PROJECTS BETWEEN IGNITE LLC AND COMPANY.
Existing projects include "The Auteurs", "Into The
Abyss", "Security Council", "Return To Morality" and
"Time Killer". All terms on these projects shall be as
set forth within this Agreement as if such projects
were developed through the Fund. Notwithstanding
the foregoing, with regard to: (i) "The Auteurs", Ignite
LLC's fee shall be negotiated in good faith; (ii) "Into
The Abyss", Ignite LLC shall receive a fee of $100,000
and no contingent compensation; (iii) "Time Killer",
Company shall finance 50% of the project's development
costs up to a
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cap of $37,500.00. Ignite LLC's development costs
on "Time Killer" were paid out of the Fund. The
development costs are set forth on the schedule
(Exhibit "A") attached to this agreement and
incorporated herein by reference.
b. THIRD PARTY PROJECT. Third party projects include
"Clique". This project shall proceed pursuant to
Ignite LLC's obligations to Sony Pictures, Inc. The
obligations referred to herein are set forth in the
Third Party schedule (Exhibit "B") attached hereto and
made a part hereof. During the period in which the
services of Butan and/or Xxxxxxxxx are utilized on
third party projects, the applicable employment
agreement with Lions Gate shall be suspended and
extended.
c. OTHER CURRENT IGNITE LLC DEVELOPMENT PROJECTS. Other
Ignite LLC development projects, which include "A
Chance For Both Barrels" and "The Bet" shall be subject
to the terms of this Agreement. Ignite LLC's
development costs on these projects will be paid out of
the Fund. The development costs are set forth in the
schedule (Exhibit "A") attached to this agreement and
incorporated herein by reference.
4. First Look Agreement. Except as set forth herein, the
parties hereto agree to terminate all obligations to each
other pursuant to the First Look Agreement. As of the date
hereof, Lions Gate has advanced $216,667.00 to Ignite LLC.
Such amount shall recouped by Lions Gate pursuant to
Paragraph 2(d) above.
5. Funding Of The Fund. Ignite LLC shall contribute all of its
cash-on-hand (less any reserve for the costs of winding-up
its operations) to the Fund as of the last day of active
operations of Ignite LLC. Ignite LLC shall pledge to the
Fund (the "Pledge") an amount equal to $500,000 less (a)
cash-on-hand contributed to the Fund and (b) expenses
incurred to date on Projects deemed to have been paid out
of the Fund as set forth in the Agreement (Exhibit A). The
Pledge shall be paid out of the next moneys received by
Ignite LLC from any and all sources. Attached hereto and
incorporated herein by reference is a schedule (Exhibit "C")
of all accounts receivable of Ignite LLC. In this regard
Xxxxxx will execute all documents necessary to give full
force and effect to its Pledge.
6. Term. The term of this Agreement shall be two years,
commencing on February 15, 2001. At the expiration of the
Term, any amounts in the Fund shall revert to Ignite LLC.
Any project in-house which does not proceed to production
within three (3) years after acquisition or two (2) years of
expiration of the Term which ever is the earlier will revert
to and be assigned to Ignite LLC subject to reimbursement to
Company of any actual direct third party costs plus interest
and contractual committments (specifically excluding
overhead and allocations) in excess of the Fund, such amount
to be payable to Company no later that the first day of
principal photography of such project.
7. Credit. If Company determines to utilize Ignite Films,
Ignite Films shall receive a first position production
credit on each Project produced hereunder and which credit
may be shared. Ignite Films' staff shall be awarded
"Produced by", "Executive Producer", or "Co-Producer"
credits within Ignite LLC's reasonable discretion, subject
to: (i) Lions Gate's approval, such approval not to be
unreasonably withheld; (ii) third party obligations;
and (iii) said credits being shared. Notwithstanding the
foregoing, all credits are subject to Legal, Financial and
Corporate approvals including but not limited to CAVCO
approval if the project is produced as a Canadian Content
project.
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8. Miscellaneous Expenses. Company shall provide Ignite Films'
employees with office space, equipment, services and
supplies necessary to conduct business. Company shall
assume and pay Ignite LLC's remaining obligation pursuant to
its copier lease, which expires on January 6, 2002. A copy
of the copier lease is attached hereto as well as the
service agreement duly assigned to Company per Exhibit "D"
attached hereto..
9. Representations And Warranties. Ignite LLC represents and
warrants that Ignite LLC: (i) has the full right, power and
authority to enter into this Agreement and (ii) is not
subject to any conflicting obligation or disability of any
kind which will or might prevent it from, or interfere with,
the execution and performance of this Agreement.
10. Indemnification. Ignite LLC shall indemnify and hold
Company, its successors, assigns, affiliates, agents,
officers, directors, employees and shareholders harmless
from and against any liability, claim, cost, damage, or
expense (including attorney's fees) arising out of or in
connection with any breach by Ignite LLC of any
representation or warranty contained in this Agreement.
Company shall indemnify and hold Ignite LLC, its successors,
assigns, affiliates, agents, officers, directors, employees
and shareholders harmless from and against any liability,
claim, cost, damage, or expense (including attorney's fees)
arising out of or in connection with any breach by Compay of
any representation or warranty contained in this Agreement.
11. Miscellaneous. This Agreement shall be governed by the laws
of the State of California and shall not be modifed except
by a written document executed by both parties hereto.
a) Assignment of Name. Ignite Film LLC exclusively
assigns under the provisions of this Agreement its name
and trademark interest in and to "Ignite
Entertainment', Ignite Films or any other usage of the
name "Ignite" to Company in perpetuity.
b) The Fund. If the Fund is not utilized then no economic
obligations are imposed on Lions Gate or Ignite LLC
relating to the Fund.
ACCEPTED AND AGREED:
LIONS GATE FILMS, INC.
/s/ XXXXX XXXXX
--------------------
Xxxxx Xxxxx
Executive Vice President
IGNITE LLC
/s/ XXXX XXXXX
--------------------
Xxxx Xxxxx
President
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EXHIBIT A
PROJECTS / AMOUNTS DEEMED TO HAVE BEEN PAID OUT OF THE FUND
1. "Time Killer" - $30,085.43
2. "A Chance For Both Barrels" - $5,008.00.
3. "The Bet" - $25,777.77
4. "Return To Morality - $15,113
EXHIBIT B
THIRD PARTY PROJECTS
1. "CLIQUE" - Attached to produce this picture for
Sony's Screengems Unit.
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