FINANCING AGREEMENT
This
Agreement is made as of this 31st day of October, 2006, by and between Bag
Boy
Productions, Inc, ("BBP") a wholly owned subsidiary of National Lampoon, Inc..,
a Delaware corporation ("NL") and Red Rock Productions, Inc., a Nevada
corporation ("RRP") regarding financing arrangements for a theatrical motion
pictures ("Picture") to be distributed by NL as follows:
1. Loan:
RRP
agrees to loan BBP funding for each Picture in an amount not to exceed Two
Million Dollars ($2,000,000.00) (unless otherwise agreed to in writing by the
parties), with payments to be made on an approved cash flow provided by
BBP.
2. Recoupment
of Investment: RRP will be entitled to recoup its investment plus interest
at
ten percent (10%) with interest accruing on the average daily balance from
the
date of the loan is provided to BBP.
3. Security
Interest: RRP will have a security interest in the Picture to the extent of
the
actual amount of the funding and as long as there is an unpaid balance on the
loan. The security interest will be relinquished by RRP when the loan has been
repaid in full.
4. Contingent
Participation: RRP will be entitled to twenty-five percent (25%) of all net
contingent proceeds from the Picture.
5 Budget:
It is intended
that the direct cash cost budget of the Picture be $2,500,000 or less, inclusive
of non-reimbursable overhead and pre-production expenses incurred by BBP.
("Budget Cost").
6. Representations
and
Warranties: BBP hereby represents and warrants to RRP that:
(a) Powers
and Authority: It is duly incorporated, validly existing and in good standing.
It has the corporate power and all necessary rights and title to enter into
and
perform this Agreement and the transactions contemplated hereby or referred
to
herein and has taken all necessary action to authorize the entry into and
performance of this Agreement and such transactions.
(b) Legal
Validity: This Agreement constitutes a legal, valid and binding obligation
of
BBP and is in proper form for enforcement against it.
(c) Non-Conflict
With Laws:
To the best of BBP's knowledge, the entry into and performance of this Agreement
and the transactions contemplated hereby do not and will not conflict with:
(i)
any existing law or regulation or any official or judicial order, or (ii) its
articles of incorporation, or (iii) any agreement or document to which it is
a
party or which is binding upon it or any of its assets.
Without
limiting the generality of the foregoing, BBP represents and warrants that
to
the best of its knowledge, there are not now any liens, claims, encumbrances,
legal proceedings,
restrictions, agreements or understandings which might conflict or interfere
with, limit, derogate from, or be inconsistent with or otherwise affect any
of
the provisions of this Agreement or any of the representations or warranties
of
BBP contained herein, including without limitation, any U.C.C. filings,
copyright assignments or other liens, inconsistent herewith or offsets or other
costs charged against the Picture by any distributor pursuant to
cross-collateralization agreements or otherwise.
(d) Consents:
All authorizations, approvals, consents, licenses, exemptions, filings,
registrations, notarizations and other matters, official or otherwise, required
or advisable in connection with the entry into, performance, validity and
enforceability of this Agreement and the transactions contemplated hereby BBP
have been or will be obtained or effected and are or will be in full force
and
effect (other than the registration of security interests to be created pursuant
hereto).
(e) Litigation:
No litigation, arbitration or administrative proceedings are threatened or,
to
its knowledge, pending which call into question the validity or performance
of
its obligations hereunder.
(f) Survival:
The
Production Company's warranties, representations and agreements are of the
essence of this Agreement and shall survive the early termination hereof. None
of the Production Company's warranties, representations or agreements shall
in
any way be limited by reason of any investigation made by NL or on behalf of
NL
regarding said
warranties,
representations or agreements.
7. Indemnification
by BBP: BBP shall, at its own expense, indemnify, save and hold harmless RRP
and
its successors, licensees, assigns, agents, representatives and affiliates
from
and against any and all claims, demands, causes of action, obligations,
liability, loss, damage, cost and expenses (including reasonable attorneys'
fees), incurred or sustained by reason of or arising out of any breach or
alleged breach of any of the warranties, representations or agreements herein
made by BBP, or from any reliance upon any such warranties, representations
or
agreements. If any person or entity shall make any claim or institute any suit
or proceeding alleging any facts, which, if true, would constitute a breach
by
BBP
of any warranty, representation or agreement herein made, BBP
shall give prompt written notice of same to NL and BBP shall undertake at its
own cost and expense the defense thereof and shall supply competent and
experienced counsel to defend any such suit or proceeding. RRP may also engage
his own counsel in connection with any such suit or proceeding.
8. Accounting
and Reports by BBP:
(a)
BBP
shall maintain complete books and records with respect to the distribution
and
exploitation of the Picture. BBP shall render to RRP, on a semi-annual basis
for
the first two years after initial distribution of the Picture, a written
statement of monies due RRP hereunder, if any ("RRP Statement"), and such RRP
Statement shall be accompanied by remittance of any amount shown to be due
to
RRP thereon. Thereafter, RRP Statements and payments shall be provided annually
for as long as the Picture generates net profits.
If
any
error is made by BBP in any RRP Statement, it may be corrected
by BBP within two (2) years thereafter by making any necessary deductions or
additions on subsequent RRP Statements, or at BBP's option by rendering an
Amended NL Statement. Each RRP Statement shall be rendered within ninety (90)
days following the end of each accounting period. Any RRP Statement rendered
by
BBP hereunder shall be deemed conclusively true and correct and binding upon
RRP, shall constitute an account stated and be incontestable unless RRP delivers
to BBP in writing specific objections, setting forth specific transactions
or
items objected to and the basis of such objections, within one (1) year from
the
date of such RRP Statement. Any recovery by RRP shall be limited to those items
specifically objected to in writing by RRP within said one (1) year
period.
(b) RRP
shall
have the right to examine to the extent they pertain to the Picture, the books
and records of BBP. In addition, BBP shall cause NL, as the distributor to
grant
rights to examine its books and records to the extent they pertain to the
Picture. . Such examination shall be made during reasonable business hours,
upon
reasonable advance written notice, at the regular place of business of BBP
where
such books and records are maintained, and shall be conducted on RRP's behalf
and at RRP's expense by the RRP's designee. Such examination shall not be made
more frequently than annually and no more than once with respect to any
accounting period or RRP Statement rendered hereunder. With respect to any
accounting period for which an RRP Statement has been rendered by RRP, such
examination shall be permitted only for a period of one year from the date
such
RRP Statement was received by RRP. RRP's examination shall be limited to those
records relating to the Picture and under no circumstances shall RRP have the
right to examine records relating to BBP's business generally
or relating to other motion pictures for purposes of comparison or
otherwise.
(c) No
action, suit or proceeding arising out of this Agreement or concerning RRP
Statement or other accounting rendered by BBP hereunder or to
the period of time to which such RRP Statement or accounting relates may be
maintained against BBP unless commenced within one (1) year after the date
such
RRP Statement or accounting is received by RRP.
8. Business
Opportunities: Each of the parties acknowledges that neither party will in
any
way be restricted from any other business activity (including any motion picture
activity), whether or not competitive to the Pictures produced pursuant to
this
Agreement, it being agreed that so-called "corporate and/or joint venture
opportunities" or fiduciary opportunities in relation to any such other
activities are hereby waived by each of the parties.
9. Additional
Documents: Each of the parties agree to execute any additional documents which
may be required or be desirable to fully effectuate the purposes and intent
of
this Agreement or to carry out the obligations of the parties hereunder,
provided that they are not inconsistent with the provisions of this
Agreement.
10. Notices:
All notices hereunder shall be in writing and shall be served by personal
delivery to RRP or the Production Company, as the case may be, or by registered
or certified mail, return receipt requested, or by telegram or FAX, addressed
as
follows:
Bagboy
Productions, Inc.
0000
Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, XX 00000
Attn:
Xxxxxx Xxxxxx
Red
Rock
Productions, Inc.
0000
Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, XX 00000
Attn:
Xxxxxx Xxxx
Any
party
may change its address at any time by written notice to the other parties.
Notices served by mail shall be deemed to be served three (3) business days
next
following deposit in the U.S. mails, and in the case of telegrams on the next
business day following delivery of the notice to the telegraph office, charges
prepaid.
11. Assignment:
BBP shall have the right to assign all or any part of its right or obligations
hereunder to any third party. RRP shall have no rights to assign without BBP's
consent. Nothing contained in this sentence shall prevent any party from
assigning its right to receive monies hereunder.
12. Miscellaneous:
(a) This
Agreement may not be modified except by written agreement signed by each of
the
parties hereto.
(b) This
Agreement shall in no event be construed as a third party beneficiary contract
and is not intended for the benefit of any person or company whomsoever except
the parties hereto.
(c) No
waiver
by one party of a breach or default by the other party shall be deemed to be
a
waiver of any preceding, continuing or succeeding breach of the same or any
other provision of this Agreement.
(d) Each
party acknowledges that no representation or warranty not expressly set forth
in
this Agreement has been made or relied upon by the other party, it being agreed
that this Agreement constitutes the entire Agreement of the parties regarding
the subject matter hereof and supersedes all prior Agreements with respect
thereto.
(e) This
Agreement has been entered into in the State of California and shall be
construed and enforced under and subject to the laws of said state.
(f) Should
there be any dispute between the parties concerning the interpretation of this
Agreement or concerning an alleged breach of this Agreement, which the parties
are unable to resolve after consultation with each other, such dispute shall
be
decided by arbitration pursuant to the regulations and procedures of the
American Arbitration Association.
The
parties agree that any award rendered by the American Arbitration Association
may be entered in the appropriate state or federal court located within the
state of California.
18.
Attorneys' Fees: In any action or proceeding between or among the parties hereto
to interpret or enforce any of the provisions hereof, the prevailing party
shall, in addition to any other award of damages or other remedy, be entitled
to
reasonable attorneys' fees and costs.
WHEREFORE,
the parties have executed this Agreement on the date first above
written.
BagBoy
Productions, Inc.
By: /s/
Xxxxxx X. Xxxxxx
Its:
CEO
Red
Rock
Productions, Inc.
By: /s/
Xxxxxx X. Xxxx
Its: President
