WARNER BROS. Warner Bros, Inc. 4000 Warner Blvd. Burbank, CA 91522 (213) 843-6000 Cable Address: Warbros
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WARNER
BROS.
Warner
Bros, Inc.
0000
Xxxxxx Xxxx.
Xxxxxxx,
XX 00000
(213)
843-6000
Cable
Address: Warbros
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Exhibit
10.20
December
16, 0000
Xxxxxx
00, 0000
Xxxxxx
and Xxxxx, PC
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
RE:
“NATIONAL LAMPOON’S VACATION”
Dear
Xxx:
The
following are the terms of the agreement between Warner Bros. Inc. and
Studio 21
Productions, Inc., a wholly-owned subsidiary of National Lampoon, Inc.
for Xxxxx
Xxxxxxx to develop, and if set for production by Warner Bros., to produce
a
motion picture tentatively entitled “NATIONAL LAMPOON’S VACTION ‘58”, based upon
Xxxx Xxxxxx’ story published in issue No. 43 of the magazine “NATIONAL LAMPOON”
in September, 1979.
1. Development
Xxxxx
Xxxxxxx to perform all development services required by Warner Bros. For
the
following consideration payable to Studio 21:
| A. |
$15,000
payable one-half on the later of signature by studio 21 and National
Lampoon, Inc. of a copy of this letter or commencement of Xxxx
Xxxxxx’ a
service pursuant to a signed agreement for his services, and one-half
on
the earlier of completion of Xxxxxx’ writing services on the first draft
and set of revisions or abandonment of the
projects;
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| B. |
$10,000
if Warner Bros. exercises the option for the second draft screenplay
from
Xxxxxx, or budgets the first draft screenplay written by Xxxxxx,
or hires
another writer, payable one-half when Warner Bros. options the
second
draft from Xxxxxx, elects to budget Xxxxxx first draft, or hires
another
writer, and one-half upon the earlier of completion of the second
draft by
Xxxxxx, completion of all writing services required by Warner Bros.
of the
second writer, or the earlier of abandonment of the project or
when the
picture is set for production; and
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| C. |
$5,000
if Warner Bros. options a second draft by Xxxxxx and thereafter
hires
another writer, or budgets the second draft screenplay by Xxxxxx
or any
screenplay written by a subsequent writer, payable one-half when
Warner
Bros. hires a subsequent writer or elects to budget Xxxxxx’ second draft
or any screenplay written by another writer, and one-half upon
the earlier
of abandonment of the project or when the picture is set for
production.
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2. Producer
Fee
If
Warner
Bros. sets the picture for production, Xxxxx Xxxxxxx to produce for
consideration payable to Studio 21 of $250,000 payable 20% less the development
fees when the picture is set for production, 60% at 3% per week for twenty
weeks
beginning six weeks prior to the schedule commencement of principal photography
of the picture, 10% upon completion of scoring, and 10% on delivery of
the
answer print. Subject to default, incapacity, or force majeure, Xxxxx Xxxxxxx
shall be pay-or-play to produce the picture when the picture is set for
production by Warner Bros. The picture shall be deemed “set for production” by
Warner Bros. at such time as the screenplay and budget have been approved
by
Warner Bros., and a definite starting date has been scheduled for commencement
of principal photography subject to acceleration or delay to accommodate
the
availability of facilities, locations, or principal cast members.
3. Contingent
Compensation
As
additional consideration for the producer services of Xxxxx Xxxxxxx, Studio
21
be entitled to receive 50% of 100% of the net profits of the picture reducible
by all third party net and gross participations to 22 ½% of 100% of the net
profits of the picture and thereafter by unabsorbed third party gross
participation and the deferments for use of the name “National Lampoon”
off-the-top, but excluding the gross participation after actual moving
breakeven
for the use of the name “National Lampoon” which participation shall be absorbed
in and borne by Studio 21’s share of net profits.
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4. Exclusivity
During
the development of the project and production of the picture, Xxxxx Xxxxxxx
shall be non-exclusive, provided that during the period beginning eight
weeks
before commencement of principal photography and continuing until completion
of
principal photography of the picture, Xxxxx Xxxxxxx shall be non-exclusive
on a
first priority basis and no other services for any third party shall interfere
with the non-exclusive services of Xxxxx Xxxxxxx for the picture or require
Xxxxx Xxxxxxx to perform exclusive services. In the event of (i) a death
or
incapacity of Xxxxx Xxxxxxx, or (ii) principal photography of the picture
coincides with principal photography of another picture produced by Xxxxx
Xxxxxxx or Studio 21 requiring Xxxxx Xxxxxxx’ non-exclusive producer services,
Studio 21 shall furnish at Studio 21’s cost a substitute producer subject to
Warner Bros. reasonable approval to perform Xxxxx Xxxxxxx’ producer services.
The substitute shall be exclusive to the picture for a period beginning
the
later of (i) eight weeks prior to commencement of principal photography,
or (ii)
the commencement of principal photography of the other picture or (iii)
the
death or incapacity of Xxxxx Xxxxxxx and continuing until completion of
principal photography of the picture and all other times on a non-exclusive
first priority basis.
5. Credit
Xxxxx
Xxxxxxx shall be entitled to the following credits if the picture is produced
by
Xxxxx Xxxxxxx:
| A. |
An
above-the-title production credit in substantially the form of
“A Xxxxx
Xxxxxxx Production” on screen, and in paid ads, in size of type of the
title of the picture;
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| B. |
A
credit as producer on screen and in paid ads in size equal to 50%
and 35%
respectively of the size of type of the title of the
picture;
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| X. |
Xxxxxx
Bros. normal exclusions and artwork title exception to apple except
the
credit as producer shall appear in any excluded ad in which director
credit appears to the director or writer credit appears to the
writer
except for award, congratulatory or special
ads.
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| X. |
Xxxxxx
Bros. may not give executive, associate and/ or producer credit
to any
third party except subject to Studio 21’s approval, which shall not be
withheld unreasonably.
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6. Election
to proceed
If
forty-five days after delivery of any draft or revised draft of a screenplay
Warner Bros. has not requested revisions the last writer or committed to
hire
another writer, Studio 21 can then request Warner Bros. by notice in writing,
that Warner Bros. designate said screenplay as the final screenplay for
which
Warner Bros. elects to have a budget prepared. Warner Bros. shall have
thirty
days from receipt of the request within which to commit to revision or
to hire
another writer, or designate said screenplay as the final screenplay for
preparation of a budget. If Warner Bros. fail to do either, then said screenplay
shall be designate the final screenplay for which Warner Bros. elect to
have a
budget prepared, subject to Warner Bros. right of final approval of the
screenplay and budget. If within six months from when the final screenplay
for
preparation of a budget is designated by Warner Bros. or is deemed to have
been
designated such a screenplay, Warner Bros. has not set the picture for
production, then Studio 21 can request Warner Bros. by notice in writing
to
elect either (a) set the picture for production, as “set for production” is
defined in paragraph 2 above, or (b) commit to the payment of the producer
fee
without setting the picture for production (i.e., go pay-or-play to Studio
21
and Xxxxx Xxxxxxx) or (c) abandon production of the picture. If within
10
business days from receipt by Warner Bros. of Studio 21’s request Warner Bros.
fails to elect any, then Warner Bros. shall be deemed to have elected (c).
If
Warner Bros. elects (b), 20% of the producer fee, less the development
fee,
shall be paid when Warner Bros. elects (b), 60% not later than six months
after
Warner Bros. elects (b), unless prior to that date the picture has commenced
principal photography, and the remaining 20% not later than one year after
Warner Bros. elects (b). In the event production of the picture is abandoned
by
Warner Bros. after Warner Bros. has elected (b), any producer fee unpaid
shall
be paid within ten days after abandonment. If Warner Bros. elects (a),
if
principal photography of the picture has not commenced within thirty days
following the designed start date, subject to acceleration or delay to
accommodate the availability of facilities, location, or principal cast
members,
then the producer fee shall be paid as if the picture had commenced principal
photography on the day which is thirty days following the designated start
date,
with the last 20% payable not later than one year after Warner Bros. elects
(a).
7. Turnaround
If
Warner
Bros. abandons the picture then Studio 21 shall have a one-year turnaround
subject to Warner Bros. standard terms including changed elements and less
favorable terms provisions, interest at a rate equal to 125% of the moving
prime
commercial rate of the First National Bank of Boston, acceleration of payment
if
Studio 21 enters into agreement with any third party for the development,
production, financing and/ or distribution of the picture, but excluding
overhead of 15% of Warner Bros.’ direct costs incurred for the
project.
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8. Completion
of Picture
The
answer print of the picture shall be completed no later than the earlier
of
eight months from commencement of principal photography or five months
from
completion of principal photography.
9. Consultation
Warner
Bros. shall consult with Xxxxx Xxxxxxx in connection with the development
of the
script, choice of the key creative personnel and cast and initial theatrical
domestic advertising campaign for the picture, provided Warner Bros.’ decision
advertising campaign for the picture, provided Warner Bros.’ decision is
determinative.
10. Travel
and Living
When
required by Warner Bros. to perform services away from his principal residence,
Xxxxx Xxxxxxx shall be provided with round-trip transportation, first class
if
available, and by air if appropriate, plus actual reasonable, accountable
expenses up to a maximum of $1,000 per week ($1,500 in major cities) pro
rata
for any portion of a week. During production of the picture Xxxxx Xxxxxxx
shall
be provided with one additional round-trip transportation to and from the
location on an “as used” basis.
11. Office
and Secretary
Warner
Bros. will furnish Studio 21 Productions offices and a production secretary
from
eight weeks prior to the start date, or sooner if necessary, until completion
of
the answer print.
12. Remakes,
Sequels and Television Programs
If
within
fie years after initial release of the picture Warner Bros. elects to produce
a
theatrical remake or sequel or television program or series, subject to
network
approval with regard to any television program or series, provided Studio
21 is
then actually and activity engaged in the production of theatrical or television
motion pictures, Studio 21 shall have the right of first negotiation to
furnish
Xxxxx Xxxxxxx, or a substitute subject to Warner Bros. reasonable approval,
to
produce the theatrical
remake
or
sequel on financial terms and conditions not less favorable to Studio 21
then
this deal, or to be individual or executive producer of any television
program
on financial terms to be negotiated in good faith, subject to the
following:
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| A. |
If
within thirty days after receipt by Studio 21 of Warner Bros.’ notice of
Warner Bros. election to produce a theatrical remake or sequel
and after
good faith negotiations, Studio 21 and Warner Bros. ‘ have note reached a
mutually satisfactory agreement, or Studio 21 has not accepted
the
financial terms and conditions of this deal, then Warner Bros.
shall be
released and discharged of any obligations to Studio 21 in connection
with
such remake or sequel, except Warner Bros. shall pay Studio 21
$100,000 on
completion of principal photography of such remake or sequel plus
a pari
passu contingent deferment of $50,000 and 5% of 100% of the net
profits
reducible by the net profits payable to any writer of such remake
or
sequel to not less than 2 ½% of 100% of the net profits of such remake or
sequel. Warner Bros. shall not have the right to use the name “National
Lampoon” in such remake or sequel unless such remake or sequel is produced
by Studio 21 except as Studio 21 and Warner Bros. may
agree.
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| B. |
If
within thirty days after receipts by Studio 21 of Warner Bros.’ notice of
Warner Bros.’ notice of Warner Bros.’ election to produce a television
program or series and after good faith negotiations, Studio 21
and Warner
Bros. have not reached a mutually satisfactory agreement, or Studio
21 has
not accepted financial terms and conditions not less than those
then
currently being offered by Warner Bros. Television for individual
of
executive producer services in comparable situations, then Warner
Bros.
shall be released and discharged of any obligations to Studio 21
in
connection with such television program or series, except that
Warner
Bros. shall pay Studio 21, (a) for a prime time U.S. network television
series produced, if at all, based upon the picture, for each episode
of
such television series royalties, payable within thirty days after
the
first broadcast of each such episode, of $1,750 for each episode
which
does not exceed thirty minutes but does not exceed sixty minutes
in
length, and $2,250 for each episode which exceeds sixty minutes
in length,
and rerun payments for any such episode which has more than one
“run” in
the United States equal to 20% of the royalty paid for the initial
run of
such episode for each of the second, third, fourth, fifth and sixth
runs
thereof, provided that payment for the sixth such run, if any,
shall
constitute full and complete payment for the sixth and all subsequent
runs
thereof. Rerun royalties shall be payable not later than four months
after
the first telecast of the respective run in any city of the United
States.
In the event such
run is telecast on regional or national television network, the
applicable
rerun royalties shall be payable not later than thirty days after
the
first telecast of the respective run in any city in the United
States. In
the event such run is telecast on regional or national television
network,
the applicable rerun royalties shall be payable not later than
thirty days
after the first telecast of the respective run in any city in the
United
States; and (b) for a remake or sequel television motion picture,
or
multi-part program (such as “Shogun”) produced, if at all, based upon the
picture, for each such remake or sequel television motion picture
or
multi-part program, payable within thirty days after the first
broadcast
of each such remake or sequel television motion picture or episode
of such
multi-part program, $7,500 pro rata for each thirty minutes of
broadcast
time to a maximum of $25,000; and (c) 5% of 100% of the net profits
of any
such television program or series, reducible by net profits payable
to any
writer of such television program or series to not less than 2
½% of 100%
of the net profits of such television program or series. Net profits
shall
be defined, accounted for and paid in accordance with Warner Bros.
Television’s then current standard definition of net profits; (d) the
royalties and net profits payable pursuant to (a), (b) and (c)
above shall
include and bear similar payments to Xxxx Xxxxxx or National Lampoon,
Inc.
for the story.
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Warner
Bros. shall not have the right to use the name “National Lampoon: in any such
television program or series unless such television program or series is
produced by Studio 21 except as Studio 21 and Warner Bros. may
agree.
13. Use
of
the Name “National Lampoon”
| A. |
For
use of the name “National Lampoon” in the picture Studio 21 shall receive
$250,00 on commencement of principal photography plus (i) as an
advance
against Studio 21’s net profits, up to $150,00 from 2 ½% of the adjusted
gross receipts of the picture in excess of the greater of two times
the
cost of production of the picture and interest once or actual cash
breakeven including interest once, to actual breakdown, (ii) an
allocation
from Studio 21’s net profits of 5% of the gross receipts of the picture in
excess of actual moving breakdown, and (iii) deferments of $250,000
each
from the gross receipts in excess of gross receipts equal to the
aggregate
of actual moving breakeven plus $10,000,000 of the gross receipts,
and at
each $10,000,000 of gross receipts thereafter. In the event production
of
the picture is abandoned after commencement of principal photography,
for
any reason other than a default by Studio 21 or National Lampoon,
Inc.,
Studio 21 shall repay Warner Bros. on demand that portion of that
$250,000
paid on commencement of principal photography that the number of
weeks
from commencement of principal photography to abandonment bears
to the
scheduled number of weeks of principal photography of the picture.
In the
event of a material default by Studio 21 or National Lampoon, Inc.,
Studio
21 shall repay Warner Bros. the entire $250,000 on demand without
prejudice to any claim Warner Bros. may have or assert against
Studio 21
or the National Lampoon, Inc. as a result of said
default.
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| X. |
Xxxxxx
Bros. shall have the right and the obligation subject to this paragraph
B
and paragraph E below, to use the “National Lampoon” name as part of the
title of the picture and in connection with the advertising, distribution
and marketing of the picture. Whenever any draft or revised draft
of a
screenplay is delivered to Warner Bros. if Studio 21 advises Warner
Bros.
with the delivery of the screenplay or revised draft screenplay
that
Studio 21 disapproves of said screenplay or revised draft for the
use of
the name “National lampoon,” then if Warner Bros. elects to proceed with
the development of a picture, or hire another writer, or request
revision
from the writer delivering the screenplay or revised draft, or
sets the
picture for production, then Warner Bros. may elect, (i) to terminate
the
agreement with Studio 21 including the right to use the name “National
Lampoon” in connection with the picture and Warner Bros. may proceed with
the development and/ or production of the picture and Warner Bros.
and
Studio 21 shall be released and discharged of any obligation to
one
another in connection with the picture except Warner Bros. shall
pay
Studio 21 any unpaid accrued development fee, and subject to Warner
Bros.
obligation to acquire the story from National Lampoon, Inc. in
the event
Warner Bros. elects to produce the picture or exercise the option,
or (ii)
to proceed with the development and/ or production of the picture
pursuant
to this agreement with Studio 21 without the right to use the name
“National Lampoon” in connection with the picture without prejudice to
Studio 21’s approval of the next revised draft of the screenplay and the
use of the name “National Lampoon” in connection with the
pictures.
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| X. |
Xxxxxx
Bros. shall also have the right to use the name “National Lampoon” in
remake and sequel motion picture and television programs provided
such
remake and sequel and television programs are produced by Studio
21
pursuant to and consistent with the terms and conditions for Warner
Bros.
use of the “National Lampoon” name for the first picture except that the
payment or royalty for use of the name “National Lampoon” in a television
program or series shall be negotiated in good
faith.
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| D. |
For
use of the name “National Lampoon” in merchandising, Studio 21 shall be
entitled to receive a separate royalty of a sum equal to 7% of
the
merchandising income actually received by Warner Bros. increasing
to 10%
of the merchandising income actually received by Warner Bros. after
the
picture is in net profits, after deducting from such income name
and
likeness payments or other expenses incurred by Warner Bros. directly
in
connection with any such merchandise products or commodities using
the
name “National Lampoon” to not less than 5% or 8% respectively of the
merchandising income actually received by Warner
Bros.
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| X. |
Xxxxxx
Bros.’ right to use the name “National Lampoon” in the title of the
picture and in connection with advertising, distribution and marketing
of
the picture, shall be subject to Studio 21’s reasonable approval of the
general form of the use of the name “National Lampoon.” Once Studio 21 has
given approval of a particular form of use then Warner Bros. shall
have
the right to use that form of use for and in connection with the
picture.
If the picture is produced by Studio 21 then the name “National lampoon”
shall be used as part of the title of the picture such as “National
Lampoon’s Vacation ‘58” or such other form or other title as Studio 21 and
Warner Bros. may mutually agree.
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| F. |
Provided
that Studio 21 or National Lampoon, Inc. has fully advised Warner
Bros. in
writing of the necessary requirements to protect Studio 21’s or National
Lampoon’s and trademarks in the name “National Lampoon,” Warner Bros.
shall follow such advice and requirements provided that an inadvertent
failure to comply with those requirements shall not be deemed a
breach by
Warner Bros. of any duty or obligation to Studio 21 nor shall any
such
inadvertent breach entitle Studio 21 or National Lampoon to xxx
for or
recover damages. Warner Bros. shall make best efforts after notice
from
Studio 21 to cure prospectively any failure by Warner Bros. of
such advice
or requirements to protect the trademarks or trade names in the
name
“National Lampoon.”
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14. Acquisition
of Story
National
Lampoon, Inc. shall xxxxx Xxxxxx Bros. an exclusive option to purchase
all
rights, excluding the right to publish the original story and reprint rights
to
the original story, but including publication rights to novelizations based
upon
a screenplay adaptation of the original story, in and to the original story
entitled “Vacation ’58,” written by Xxxx Xxxxxx and published in Issue 43 of the
“NATION LAMPOON” magazine in September, 1979 for $7,500 for one year from the
date of this letter extendable for an additional year for $7,500 against
a
purchase price of $65,000 plus 2 ½% of 100% of the net profits of the
picture.
15. Writer’s
Agreement
Studio
21
shall assign to Warner Bros. the agreement between Studio 21 Productions,
Inc.
and the Huge Company for the writing services of Xxxx Xxxxxx and Xxxxxx
Bros.
shall assume the executory obligations of said agreement except to the
extent
those obligations may be modified in writing by Warner Bros. and the Huge
Company.
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16. Novelizations
Subject
to the applicable provisions of the writer’s Guild of America Basic Agreement
and the rights if any of Xxxx Xxxxxx pursuant to the agreement between
Studio 21
and the Huge Company, Warner Bros. shall have the right to publish or authorize
the publication of novelizatons, photo novels, or any other publication
in
print, of adaptations of the screenplay for the picture. Warner Books shall
have
the right of first negotiation with regard to any publication in print
and
Warner Bros. shall license publication rights to Warner Books provided
the
financial terms of the deal are commercially acceptable. If Warner Books
does
not negotiate for any print publication rights then National Lampoon, Inc.
shall
have the right of second negotiation with regard to any publications in
print,
not published by Warner Books, and Warner Bros. shall license publication
rights
to National Lampoon, Inc. provided the financial terms of the deal are
commercially acceptable. For any publications in print not published by
Warner
Bros. may accept any offer acceptable to Warner Bros. Advances and royalties
received by Warner Bros. from publications in print shall be included in
the
gross receipts of the picture without distribution fee.
The
remaining terms and conditions shall be Warner Bros. standard terms and
conditions, including the definition of net profits, subject to such changes
as
Warner Bros. may agree after good faith negotiations. Pending execution
of more
formal documents, this letter, when signed by Warner Bros. Inc., Studio
21
Productions, Inc., National Lampoon, Inc., and Xxxxx Xxxxxxx shall constitute
a
valid and binding agreement among Warner Bros., Studio 21 Productions,
Inc.,
National Lampoon, Inc. and Xxxxx Xxxxxxx.
Very
truly yours,
Warner
Bros. Inc.
By
/s/
Xxxxx X. Xxxxxx
Xxxxx
X.
Xxxxxx
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AGREED:
NATIONAL
LAMPOON, INC.
By
/s/
Xxxxx Xxxxxxx
STUDIO
21
PRODUCTIONS, INC.
By
/s/
Xxxxx Xxxxxxx
XXXXX
XXXXXXX
/s/
Xxxxx
Xxxxxxx
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