EXHIBIT 10.24
June 1, 2003
Wilf Shorrocks
Peak Entertainment
Derbyshire, England
United Kingdom
RE: Monster in My Pocket--LETTER OF INTENT
Dear Wilf:
In consideration of the mutual covenants contained herein and for good and
valuable consideration, the following sets forth the terms of the agreement
between Mainframe Entertainment, Inc ("MFE") and Peak Entertainment
("Licensor").Subject to the terms hereof, MFE will have the exclusive and
irrevocable right to produce a series ("Series"), special for television and/or
direct-to-video ("Special") and/or television movie ("MOW") (sometimes
collectively referred to as "Program") based on the series of toys, and all
characters, titles, concepts, copyrights, trademarks and stories therein,
entitled "Monster in my Pocket" ("Property"). All fees and payments below
include all third parties associated with Licensor.
1. TERMS & RIGHTS: In consideration of MFE's development services (including
pitch proposal and MFE funding of twenty-five percent (25%) of the
mutually-approved, actual "hard cost", no-overhead budget of a 1-3 minute
promotional video incorporating some MFE graphics and Licensor's
previously-produced animated content), MFE will have the exclusive rights in
Canada, commencing immediately and expiring in eighteen (18) months (the
"Term"), to pitch and sell one or more Programs utilizing the stories, artwork,
characters, title and all other creative elements which appear in the Property,
as well as exploit any and all ancillary rights to such Program(s), including
without limitation video rights, sequels and spinoff rights and other derivative
work rights, licensing and merchandising rights (subject to paragraph 3 below)
and publishing rights. In addition, and in further consideration of MFE's
development services, MFE will be attached as the producer and animation studio
for the Program(s), and shall, at a minimum, provide all production services
with the exclusion of script writing, storyboards, and mutually-approved
post-production services. In addition, MFE shall serve as the merchandise
licensing partner in the United States, subject to paragraph 3 below, on the
Program(s), and shall jointly distribute United States broadcasting rights with
Licensor. The Term will be automatically extended without payment for the
duration of a development deal with a third party exhibitor or other third party
financier in which Canadian rights are included. Licensor shall have the right
of reversion of all underlying rights granted herein five years following the
completion of the master of the last Episode, subject to those rights in the
Property necessary to permit MFE to distribute and exploit the existing Episodes
in Canada in perpetuity in all media in accordance with the terms of this
Agreement.
2. DISTRIBUTION PROCEEDS: MFE shall contribute twenty percent (20%) and Licensor
shall arrange for eighty percent (80%) of the mutually-approved production
budget of the Program(s), with payments by Licensor to MFE to be remitted
according to a mutually-approved cash flow production schedule. Licensor and MFE
shall mutually approve the budget of the Program(s). MFE shall own and control
all distribution rights in Canada on a "flat, buyout" basis, with the exception
of licensing and merchandising rights per paragraph (3) below, and shall recoup
its twenty percent budgetary contribution to the Program solely out of its
Canadian rights. Licensor shall recoup its eighty percent budgetary contribution
solely out of the world excluding Canada, subject to the terms herein. With
regard to distribution in the United States, Licensor and MFE shall jointly
pitch all U.S. television broadcasters, and MFE shall be entitled to a
distribution fee of 7.5% of 100% of gross distribution revenues (reduced to 5%
in the case of the WB Network) for all television broadcast sales in that
territory,. MFE will also be the distributor of any sequels or spin-offs from
the Programs on the same terms and conditions contained herein.
3. MERCHANDISE LICENSING PROCEEDS: Licensor shall serve as the worldwide master
worldwide licensor for the Property, provided, however, that a) MFE shall serve
as the Licensing and Merchandising agent in Canada and shall deduct from gross
licensing revenues derived from Canada a licensing agency fee of 35% of 100% of
such gross licensing revenues, inclusive of costs, and b) Licensorwill
administer Licensing and Merchandising rights in the United States in
partnership with MFE and MFE shall be entitled to deduct or otherwise receive
20% of 100% of such gross licensing revenues, with such fee reduced to a floor
of 5% if Licensor contracts with Warner Bros. Consumer Products division or any
other licensing division of a broadcaster of such standing (mutually agreed by
both parties) for United States Licensing rights. Provided further, however,
that with regard to the master toy license for the Property, should such master
toy license for the Property be concluded with a United States-based toy
manufacturer (including, without limitation, Hasbro, Mattel, Playmates and Jakks
Pacific), then MFE licensing agency fee noted above shall be reduced to 7.5% of
100% of gross licensing revenues derived from such master toy license. Proceeds
from merchandise licensing will not be cross collateralized with distribution
proceeds.
4. PRODUCING SERVICES: MFE shall receive a Presentation credit and corporate
logo in the end titles, plus two (2) executive producer credits.
5. CREATIVE CONTROL: The development materials will be completed within a six
(6) month period following execution of this Agreement. Any changes to and or
revisions to development materials shall be mutually approved by Licensor and
MFE. The contributions made to development shall be reimbursed to MFE from the
Budget of the initial Program and be repaid on the first day of key animation of
any production based on the Property. Should Licensor make substantial use of
the development materials created by MFE in another Series, Licensor shall pay
to MFE, in the first day of key animation of any production of any Series based
on the Property, all actual, out-of-pocket amounts advanced by MFE for the
development of the Property, provided, however, that in no case shall such
amount exceed US$30,000.00 without mutual approval of the parties. Approval will
be deemed given or consultation rights will be deemed exercised if MFE does not
receive Licensor's comments within five (5) days from the day Licensor receives
the materials. Licensor's approval rights are subject to network approval and
won't be exercised in such a way as to increase subject or delay schedule. MFE
has all financial controls, and all final creative controls other than as
specified above.
Licensor represents and warrants that it owns and controls all rights to the
Property necessary to enter into this Agreement, and Licensor agrees to
indemnify and hold harmless MFE form all liabilities, damages, judgments etc.
arising from breach of this representation and warranty. This Agreement shall be
governed by the always of British Columbia and the federal laws of Canada
applicable therein, and the parties hereby irremovably attorn to the exclusive
jurisdiction of the courts of British Columbia. This letter of intent shall
constitute an enforceable agreement between the parties on the terms hereof,
however, it is understood and acknowledged that this is not a long form
agreement and does not evidence all the terms and conditions customarily
contained in a long-form agreement. The parties reserve their respective rights
regarding the negotiation and agreement of such customary terms of a long-form
agreement.
Mainframe Entertainment Inc. Peak Entertainment
By: /s/ By: /s/
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Its CEO Its CEO
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Date 6/6/03 Date 6.6.2003
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