AGREEMENT TO PRODUCE FILM
THIS AGREEMENT is entered into and effective as of April 9, 2000, by
and between NEW VISUAL ENTERTAINMENT, INC., a Utah corporation ("MOGS") and
Xxxxx Xxxxx, Xxxx Xxxxx, and Xxxx-Xxxx Xxxxxxx (collectively, "FIGS") (MOGS and
FIGS are sometimes collectively hereto as the "Parties").
This Agreement sets forth the mutual intentions of the Parties with
reference to and in contemplation of the following facts, circumstances and
1. MOGS: MOGS is in the business of, among other things, financing the
production of motion pictures.
2. FIGS: FIGS are in the business of, among other things, producing,
directing, and editing motion pictures; FIGS intends on forming an entity
(partnership or corporation) tentatively named "Top Secret Surf Productions".
3. FILM: The Parties have agreed to form an entity (either an LLC,
partnership or corporation) ("TSSF Venture") for the purpose of creating,
writing, developing, filming, producing, distributing or otherwise exploiting an
original "surfing/adventure" treatment now or currently entitled "Top Secret
Surf Film" (herein referred to as "TSSF") as a feature length motion picture and
excerpts or adaptations thereof, in all mediums now or hereinafter developed,
including but not limited to, theatrical, non-theatrical, broadcast cable, made
for home video, video (VHS or PAL), DVD, Internet, manual and computerized
animation and computer games, animation and merchandising (the "Film"). (The
Film and all ancillary rights thereto sometimes collectively referred to as the
4. TSSF VENTURE COMPANY: The Parties shall form and maintain the TSSF
Venture Company for the sole purpose of the TSSF Venture and MOGS shall be
responsible for any and all expenses incurred for all start-up costs, including
incorporation fees and costs.
5. ASSIGNMENT IN SCRIPT: Subject to the next sentence, FIGS and MOGS
mutually agree that they hereby assign any and all of their rights, title, and
interest in and to the Film and Property, with respect to this Film, which they
individually or collectively own to the TSSF Venture, including without
limitation the option for rights in the script for the Film, and that each will
assign any other rights in and to the Film and Property which they may acquire
in the future immediately upon obtaining said rights. Subject to paragraph 15
below, the FIGS reserve all rights not expressly granted to the TSSF Venture
hereunder, including, without limitation, all remake, sequel, spin-off,
ancillary, and subsidiary rights in the Property.
PRODUCTION REQUIREMENTS, SCHEDULE AND COSTS:
6. PRODUCTION REQUIREMENT AND SCHEDULE: FIGS agrees to complete the
Film so that it will be ready for a Summer 2002 release. FIGS shall provide MOGS
with a preliminary production schedule within thirty days of execution of this
7. PRODUCTION INDUSTRY STANDARDS: FIGS agrees to produce the Film in
accordance with industry standards with respect to the production values as they
relate to script, set, direction, editing, verification of technical accuracy
and budget. The production efforts for the Film shall specifically include, but
not be limited to facility, crew and equipment.
The Parties acknowledge that if the production of the Film is hampered
or interrupted or interfered with for any event or reason beyond the Parties
control, including but not limited to weather conditions, any ordinance, any
state or federal law, governmental order or regulation, death, illness or
incapacity of any principal member of the cast of the Film, then the production
of the Film may be postponed or suspended for as long as the cause or event
which hampers, interrupts, or interferes with production of the Film shall
Subject to the previous paragraph regarding force majeure, if FIGS
fails to produce the Film as provided herein, then FIGS percentage of ownership
interest in the Film and Property shall be reduced by the proportionate amount
of additional costs incurred by MOGS in order to complete the Film.
8. PRODUCTION BUDGET: MOGS agrees to provide the funding for the
production of TSSF of Two Million Two Hundred Fifty Thousand Dollars
($2,250,000) ("Budget Funds"). The Parties agree that the amount of Three
Hundred Thousand Dollars ($300,000) of the Budget Funds shall be used to
purchase equipment necessary for the production of the Film, and in order to
expedite the TSSF Venture, FIGS shall specify the equipment needed and MOGS
shall purchase the equipment in MOGS name within a reasonable time of execution
of this Agreement. The Parties further agree that Two Hundred Thousand Dollars
($200,000) of the Budget Funds shall be deposited into an account by MOGS of
which FIGS shall be a signatory for use for approved pre-production and
production costs that may arise prior to formation of the TSSF Venture
Production Account. These funds shall be deposited in a separate account upon
signing of this Agreement. An unused portion of the above-mentioned funds shall
be deposited into a "Production Account" in the name of the TSSF Venture, once
FIGS shall provide MOGS with a preliminary production budget within
thirty days of execution of this Agreement. The Parties shall mutually agree
upon the production budget. MOGS agrees to deposit into the Production Account
on a monthly basis Budget Funds in an amount to assure that the Production
Account has a minimum balance of Two Hundred Thousand Dollars ($200,000) at the
beginning of each month until the total amount of the Budget Funds has been
deposited into the account. FIGS shall disburse Budget Funds from the Production
Account for approved production budget expenses only. If in any given month the
Production expenses exceed the amount in the Production Account, upon written
request by FIGS stating the purpose for such funds, MOGS shall deposit the
additional approved Budget Funds into the Production Account for those expenses
up to the total amount of Budget Funds. The Budget Funds may be used for any
line item in the approved production budget up to the total amount of the Budget
If MOGS fails to deposit any required Budget Funds as provided above
within ten (10) days of the date they are due, then MOGS percentage of ownership
interest in the Film and Property shall be reduced by the proportionate amount
of additional financing obtained from a third party required to complete the
9. BUSINESS, EDITORIAL AND CREATIVE CONTROL: The Parties shall have
equal power, authority and control over all business, financial and legal
matters in connection with the Property, including but not limited to
distribution and sales of the Property. FIGS shall have full editorial and
creative control with regards to the production of TSSF and may utilize 16mm
film, 35mm film, or Digital Video, or any other medium, at their discretion;
however, the Parties shall each review the rough draft script treatment for the
Film presented by FIGS, and FIGS agrees to reasonably consider all input and
modifications suggested by MOGS, on a timely basis.
10. CREDIT: Subject to any customary exclusions and exceptions of any
distributor or subdistributor of the Film, the Film shall be presented in first
position on screen as a New Visual Entertainment, Inc. Production in association
with Top Secret Surf Productions, with allotments distribution partner(s) to be
negotiated in good faith. Xxx Xxxxxxxxxx, Xx. shall be given a screen credit as
"Executive Producer" with placement to be determined by FIGS; however, MOGS
shall have a right of consultation with regard to such placement. Any individual
writing, directing, and producing, or other credits for TSSF shall be determined
by FIGS; however, MOGS shall have a right of consultation with regard to such
11. 3D FOOTAGE: MOGS shall film 3D behind the scenes footage filmed at
MOGS sole expense with the footage to be used for a special venue 3D
distribution and exploitation. The 3D filming will be scheduled in agreement
with FIGS and will not encumber Flat or 2D production. Because 3D is MOGS
primary business, all rights revenues derived from the 3D film footage shall be
exclusive owned by MOGS; however, MOGS shall grant FIGS a free license for use
of the footage in promoting the Film, including but not limited to use in
trailers, print advertisements, and use on the internet. FIGS shall retain the
right for approval of any 3D content. FIGS shall have the right to use all
footage filmed by MOGS. MOGS agrees that the 3D distribution and exploitation
shall be subject to any requirements of the Home Video Distributor and upon
mutual agreement of the Parties.
FILM OWNERSHIP AND COPY RIGHT PROTECTION:
12. TITLE: Any and all property and assets of the TSSF Venture as well
as all intangible rights, including without limitation, all copyrights, trade
names and trademarks, in and to the Film and all other forms of exploitation of
the Property, to the extent solely related to the Film, and all ancillary
merchandising, music and book publishing rights, shall be owned by and title
held in the name of the TSSF Venture.
13. COPYRIGHT PROTECTION: FIGS agrees and shall be solely responsible
for legally obtaining and registering the Property and any copies or parts
thereof, to the extent related to this Film, with the required copyrights in the
name of the TSSF Venture. MOGS agrees to pay for the costs of same.
14. OWNERSHIP OF ASSETS UPON DISSOLUTION: Both MOGS and FIGS agree that
upon any dissolution of the TSSF Venture each of the Parties will own a 50%
share of the Property, as tenants in common, including but not limited to TSSF
outtakes, original footage, and completed master of the Film, with the
understanding that neither Party shall make any use of such assets subsequent to
such termination, except with the prior written consent of the other Party first
had and obtained.
15. SEQUEL: MOGS shall have a right of first refusal to participate in
the making of any sequel, remake, spin-off production, or other similar
production not expressly granted to the TSSF Venture to TSSF for five years from
completion of TSSF ("Sequel Rights'). FIGS shall provide MOGS with written
notice of any third party bonafide offer for the Sequel Rights, and then MOGS
shall have fifteen (15) days to accept or reject the offer for Sequel Rights
upon the same terms as the third-party bonafide offer.
After five years from completion of TSSF, all Sequel Rights revert to
FIGS; however, MOGS shall have the option to extend their right of first refusal
for an additional five years upon written notice by MOGS to FIGS prior to the
expiration of the initial five year period, and payment by MOGS to FIGS of an
option fee to be mutually agreed upon and negotiated in good faith, which shall
be credited toward any budget funds paid by MOGS if MOGS participates in any
Sequel Rights; however, the option fee shall be forfeited by MOGS if MOGS
rejects the offer to participate in any Sequel Rights.
DISTRIBUTION OF REVENUE:
16. REVENUE: In consideration of the services provided by the Parties
pursuant to this Agreement, the parties shall be paid a percentage of the
revenue generated from the distribution, exploitation and marketing of the
Property, in accordance with the following priority:
a. TSSF Venture operating expenses, including all expenses
incurred by the TSSF Venture in connection with the
distribution and exploitation of the Film and the ancillary
rights therein and all costs of production of the Film, which
have not already been paid.
b. INITIAL DISTRIBUTION: MOGS shall be paid One Hundred Percent
(100%) of the gross revenue received from the distribution and
exploitation of the Film and the Property in all media
(including, without limitation, all ancillary rights)
worldwide until such time as MOGS receives the sum of its
initial investment of up to $2,250,000, which shall not
include interest, plus any such additional financing provided
pursuant to this Agreement (the "return of investment").
c. Deferments, if any.
d. Third Party Participants, if not paid directly by MOGS or
e. ADDITIONAL DISTRIBUTION: After the return of MOGS investment,
MOGS and FIGS shall each receive Fifty Percent (50%) of all
net profits. The net profits shall be defined as gross
receipts received by the Film and the Property, to the extent
related to this Film, in all media (including, without
limitation, all ancillary rights) worldwide, less the
aggregate of all costs, charges, fees and expenses of the Film
and the Property. For purposes of computing net profits only
the costs and expenses approved by both Parties and incurred
by either Party directly on behalf of the Property shall be a
charge against and shall reduce the gross receipts of the
Property in calculating net profits of the Film and the
17. PAYMENT TO PARTIES: Revenue payable to the parties shall be made no
later than the tenth (10) calendar day of each month after receipt of payment.
18. RECORD KEEPING: For so long as the TSSF Venture continues (i) the
TSSF Venture shall maintain complete and accurate books and accounting records
for the business and operations of the Property, including but not limited to
distribution and merchandise sales, and shall maintain such records for a period
of five (5) years and (ii) the TSSF Venture shall be obligated to provide FIGS
and MOGS on a monthly basis a report of such distribution and sales information
for the previous month. During such period, all such records shall be made
available for inspection by FIGS and MOGS, or their authorized representatives,
at their respective expense during normal business hours upon at least five (5)
business days prior written notice. The TSSF Venture shall engage the services
of an accountant who shall be selected with the mutual approval of both Parties
to perform accounting services for the TSSF Venture.
19. AUDIT RIGHTS: FIGS and MOGS may cause such books and accounting
records to be audited at their own expense upon thirty (30) calendar days prior
written notice but no more frequently than six (6) times during any twelve (12)
month period. Any underpayment shall be paid to FIGS or MOGS within ten (10)
calendar days after presentation of the auditor's findings. If any audit
indicates an underpayment of at least 5%, the TSSF Venture shall be responsible
for all audit fees and costs. Any overpayment to FIGS or MOGS shall serve as a
credit toward the next month's succeeding payment due FIGS or MOGS. All audit
rights shall expressively survive the termination of this Agreement.
20. WARRANTIES AND INDEMNIFICATION: Each Party hereby warrants and
represents to the other that they (1) have the right and capacity to enter into
this agreement; (2) shall not encumber or sell any property, assets or
intangible rights of the TSSF Venture without the written consent of the other
Party; and (3) the Film and the Property shall not violate or infringe upon the
common-law right, copyright, trademark or literary rights or right of privacy of
any person or entity.
Each Party hereby indemnifies and holds harmless the other Party, its
affiliates, and their respective officers, directors, employees, shareholders,
licensees, agents, successors, assigns, attorneys, and independent contractors,
from and against any and all claims, liabilities, damages and costs (including
but not limited to reasonable outside attorneys' fees and court costs) arising
from any uncured material breach by such Party of any representation, warranty
or agreement made by such Party hereunder.
21. ARBITRATION: The parties hereby submit all controversies, claims
and matters of difference arising out of this Agreement to arbitration in Los
Angeles or San Diego, California according to the rules and practices of the
American Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement shall
further be governed by the laws of the State of California.
22. INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such ambiguity
shall not be resolved by construing such provisions or any part of or the entire
Agreement in favor of or against any party herein, but rather by construing the
terms of this Agreement fairly and reasonable in accordance with their generally
23. MODIFICATION OF AGREEMENT: This Agreement may not be amended or
modified except by a written instrument duly executed by each of the Parties.
24. COOPERATION OF PARTIES: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this Agreement
and that they will sign and execute any and all additional papers, documents and
other instruments necessary to bring about and perfect the purposes of this
Agreement. Specifically, promptly following the execution of this Agreement, the
Parties shall negotiate in good faith a definitive TSSF Venture Operating
Agreement, which shall include the terms contained in this agreement as well as
additional terms and conditions as the parties shall mutually agree.
25. ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought in connection with any of the provisions of the Agreement,
the prevailing party shall be entitled to recover reasonable outside attorneys'
fees and other costs incurred and paid in that action or proceeding, in addition
to any other relief to which it may be entitled.
26. ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the matters herein set
forth, and all prior negotiations, writings and understandings relating to the
subject matter of this Agreement are merged herein and are superseded and
canceled by this Agreement.
27. COUNTERPARTS: This Agreement may be signed in one or more
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument.
28. FACSIMILE TRANSMISSION SIGNATURES: A signature received pursuant to
a facsimile transmission shall be sufficient to bind a party to this Agreement.
NEW VISUAL ENTERTAINMENT, INC.
DATED: April 9, 2000 By: /S/ XXXXXXX X. XXXXXXXXXX, XX.
XXXXXXX X. XXXXXXXXXX, XX.
DATED: April 9, 2000 By: /S/ XXXXX XXXXX
DATED: April 9, 2000 By: /S/ XXXX XXXXX
/S/ XXXX-XXXX XXXXXXX
DATED: April 9, 2000 By:------------------------------------