EXHIBIT 10.3
Xxxxx Dead, Inc.
0000 Xxxxxxx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
December 1, 2002
Xxx Xxxxx
UTA
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxx, Esq.
Loeb & Loeb LLP
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Re: "Xxxxx Dead" - Sidetracked Productions, Inc. (f/s/o Xxxxx Xxxxxx) -
DEAL MEMO
Dear Xxx and Xxxxx:
Below please find the principal terms of the agreement between Xxxxx Dead,
Inc. ("Company") and Sidetracked Productions, Inc. (Fed ID# 00-0000000)
("Lender") for the services of Xxxxx Xxxxxx ("Xxxxxx") in connection with
the theatrical motion picture currently entitled "Xxxxx Dead" (the
"Picture"). This agreement shall be referred to herein as the "Deal
Letter," and Lender and Xxxxxx shall be referred to
herein, individually and collectively, as "Director."
1. Conditions Precedent: Director's obligations hereunder are subject to
the satisfaction of all of the following:
a. Signature and delivery of this Agreement by Director and Company;
b. Director's approval of the specific amount of money to be raised
as financing for (i) the budget of the Picture; and (ii) additional
costs and funds to be available in connection with the project;
c. Director's receipt of stock certificates of Company; and
d. Director's approval of the budget of the Picture. As of February
25, 2003, the tentative budget of the Picture is approximately $6.1
million, and remains subject to adjustment and Director's approval.
2. Fixed Directing Fee: Fixed Director Fee shall be $250,000 and shall be
on a most favored nations basis with all cast engaged in connection with the
Picture (e.g., no cast member shall receive a higher fee for their services on
the Picture than Director). The Fixed Director Fee shall be payable to Lender on
a customary 20/60/10/10% basis over pre-production/principal
photography/delivery of Director's first cut/delivery of the answer print (with
the pre-production and principal photography payments made in approximately
equal weekly installments).
3. Fringes: Company shall pay all fringes on the amount set forth in
Paragraph 2 above as required by worker's compensation laws and the DGA Minimum
Basic Agreement. Company shall be and remain signatory to the DGA Basic
Agreement.
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4. Contingent Compensation: Company shall issue to Director 270,000 shares
of Company's common stock as "founders' stock" upon payment by Director of the
sum of $270.00 (i.e., $.001 per share) (which issuance shall be as soon as
practicable). The aforesaid price per share shall be the same as that of the
"founders' stock" issued to the other founders of Company. Director's 270,000
total shares of common stock will represent 30% of the common stock outstanding.
In addition, Lender shall be entitled to receive a participation (the
"Participation") equal to 3.75% of 100% of the "Adjusted Gross Receipts" derived
from the Picture. As used herein, "Adjusted Gross Receipts" means 100% of the
gross receipts derived by Company (including any parent, affiliate and
subsidiary) from the distribution and exploitation of the Picture (including any
and all ancillary rights therein), less Company's actual, direct, out-of-pocket
expenses in connection therewith. The definition of Lender's Participation shall
be no less favorable than the definition of the participation (however
denominated) payable to any other person or company granting rights or rendering
services in connection with the Picture. For the avoidance of doubt, except to
the extent necessary to set up a reserve to cover reasonably anticipated ongoing
operating expenses for Company, including, without limitation, payment of legal
and accounting fees, office expenses and the like, Company shall not be entitled
to charge distribution, sales, administrative or other fees on the revenues
derived from the Picture and/or any ancillary rights therein, nor shall Company
be entitled to charge overhead or any other indirect or similar cost (whether
set forth in the budget for the Picture or payable out of the revenues derived
from the Picture) without Director's prior written consent. Subject to the
foregoing, Adjusted Gross Receipts shall be defined as set forth in Exhibit A
("Short Form Definition of Participant's Net Profits") attached hereto; and
Company represents and warrants that the definition set forth on Exhibit A is
and shall remain applicable to all persons and companies receiving a
Participation in the revenues derived from the Picture (i.e., no one shall
receive a more favorable definition).
If Director resigns as Director of the Picture (other than for Company's
breach) or is terminated by Company for "cause" (including Director's
death or disability) prior to the completion of his duties, his
Participation shall be reduced; and a portion of his 270,000 shares of
common stock shall be subject to Company's re-purchase at a nominal fee of
$.001 per share as set forth below. Director shall be deemed to be vested
for (and remain entitled to receive) that percentage of Director's
Participation and shall be entitled to retain that percentage of his
270,000 shares of common stock that equals the percentage of the Fixed
Director Fee that shall have accrued in accordance with Paragraph 2 above
prior to the date that Director resigns or is terminated (as aforesaid).
It is the intention of Director and Company to establish a mutually
approved third party Collection Account into which all revenues derived
from distribution and exploitation of the Picture and ancillary rights
therein by the distributors and licensees of the Picture and said
ancillary rights shall be irrevocably directed, to pay the parties hereto
acknowledging that the agreement of third party financiers will be
required in connection therewith.
5. No Crediting of Overscale or Contingent Compensation Against Residuals:
Company shall not offset or credit any overscale or contingent compensation
against residual or supplemental market payments to which Director may become
entitled under the DGA nor shall Company credit any of same residual or
supplemental market payments against any contingent compensation to which
Director may become entitled under Paragraph 4 above.
6. Start Date/Exclusive Services: The designation of the start date shall
be subject to the mutual approval of Company and Director. Director's services
shall be exclusive commencing eight (8) weeks prior to the scheduled start date
through completion of Director's last contractual cut of the Picture; and at all
other times Director's services shall be rendered on a non-exclusive,
first-priority basis through delivery of the final answer print of the Picture.
7. Pay-or-Play: Director shall become pay-or-play for the Fixed Directing
Fee upon (1) mutual approval of the final direct cost budget and the final
production schedule, (2) mutual approval of
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the script (Company and Director acknowledge approval of the current draft by
Director dated as of June 11, 2001), and (3) Company's securing of financing
(including a completion bond). Notwithstanding the foregoing, Director shall
become pay-or-play not later than at such time as any cast member becoming
pay-or-play or upon commencement of pre-production of the Picture, whichever is
earlier. If Company has not secured 100% of the financing of the Picture within
90 days of the Company's Initial Public Offering being declared effective by the
Securities and Exchange Commission ("Effective Date"), Director shall have the
option to renew this Agreement for an additional 90 days. If the Director
decides not to renew this Agreement, or if the Company has not secured 100% of
the financing of the Picture within the renewal period (i.e., 180 days after the
Effective Date), than any and all rights previously held by the Director in
connection with the Picture and/or the screenplay written by Director shall
revert to Director and Director shall have no further obligation to Company
hereunder. Additionally, unless and until Director is made "pay-or-play",
Director shall be free to work for third parties and/or take another job.
8. Director's Inducement Letter: Director acknowledges that he will be
required to execute a customary inducement letter for the benefit of the
completion bond company in connection with the issuance of a completion bond for
the Picture; and Director agrees to execute an inducement letter customary and
appropriate for a director receiving "final cut" of a theatrical motion picture;
provided, that such inducement letter will be subject to good faith negotiation
between Director and said bond company within customary parameters and shall
contain provisions prohibiting Director's removal from the Picture in the
absence of material uncured breach or Director's disability during the term of
Director's exclusive services on the Picture beyond a specified number of weeks,
as well as other customary protections for "final cut" directors contained in
such inducement letters.
9. Cuts & Previews/Right of Final Cut: In addition to Director's cutting
and preview rights under the DGA Minimum Basic Agreement, Director shall have
the right of final cut of the Picture. Such final cut right shall also extend to
the video and DVD versions of the Picture.
10. Approvals, Consultations and Controls:
a. Cast - Director shall have final approval as to the selection of
principal and key supporting cast. Company and Director acknowledge
approval of Xxxxx Xxxxx in the lead male role of "Xxx Xxxxxxx".
Notwithstanding, Director's approval rights, the parties acknowledge and
agree that the engagement of the personnel (and replacements thereof as
applicable) designated by Director hereunder shall be subject to the
budgetary parameters for such personnel as approved pursuant to Paragraph
1.
b. Key Crew - Director shall have final approval over key crew
(including replacements thereof) including but not limited to the
composer, casting director and all department heads. Notwithstanding the
foregoing, the following individuals are pre-approved by Company and
Director: (i) Xxx Xxxxxxxx, as director of photography. Notwithstanding,
Director's approval rights in this Paragraph 10, the parties acknowledge
and agree that the engagement of the personnel (and replacements thereof
as applicable) designated by Director hereunder shall be subject to the
budgetary parameters for such personnel as approved pursuant to Paragraph
1.
c. Locations - Director shall have final approval over principal
shooting locations. Notwithstanding Director's approval rights in this
Paragraph 10, the parties acknowledge and agree that the locations
designated by Director hereunder shall be subject to the budgetary
parameters of the Picture approved pursuant to Paragraph 1.
d. Approval of Distribution Deal - Director, who will also work as a
producer on the film, shall work in consultation with the Picture's other
principal Producer(s), in order to recommend to the Company any
distribution deals for the Picture with a third party licensee or
purchaser. "Producer" in this context shall mean only those persons
credited as "Produced by" on
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the film, and not `associate producers,' `executive producers,' or other
similarly credited personnel. The parties acknowledge and agree that the
final management approval of any such distribution recommendation must be
made by the Company in accordance with Delaware Law and the Company's
charter. Collectively, Producers shall have the exclusive right to make
any such distribution recommendations to the Company, and the Company
agrees not to enter into any distribution deals without such
recommendations. Company (and its domestic distributor) shall meaningfully
consult with Director with respect to the initial US theatrical
advertising campaign and release pattern (subject to the exigencies of
distribution) and with respect to the exhibition of the Picture at film
festivals. Notwithstanding anything to the contrary contained herein,
Director's right of final cut on the Picture shall be final and binding on
any third party assignee or designee who assumes the rights and/or
obligations of this Deal Letter or the Picture.
11. Credit: Subject to Director completing all material directing services
hereunder, (i) individual "Directed By" credit per DGA, on screen in the main
titles, and in paid ads (billing block portion), with size and excluded ad tie
to individual producers; (ii) possessory credit substantially in the form "A
Film By Xxxxx Xxxxxx", before or above the title of the Picture on screen in the
main titles, and in paid ads (billing block portion), with size and excluded ad
tie to production company credits; and (iii) a "Produced By" credit, on screen
and in paid ads (billing block portion) shared with Xxxxx Xxxx in second
position, Xxxxxx in first position, and no other person(s) accorded individual
"Produced by" credit, with size and excluded ad tie to all other producers. In
the event that any cast member, Company and/or any production company is
accorded credit (including, without limitation, a presentation credit to a
financier or distributor) in the artwork portion of any paid or excluded
advertising, then Director shall receive his possessory credit in the artwork
portion of such paid or excluded advertising in the same size.
12. Office and Assistant/Trailer: Company to provide Director with an
exclusive office and an exclusive assistant for Director's use while rendering
exclusive services. During the period of Director's post-production services
said office and assistant may be shared by Director and Xxxxx Xxxx until
delivery of the final answer print of the Picture. Company shall provide a
trailer for Director while on location which shall be of first-class quality,
subject to budgetary parameters and location exigencies.
13. Travel and Expenses: If Director is required to travel more than 50
miles outside of the Los Angeles area, then Company shall provide Director with
travel and expenses to be negotiated good faith as permitted in the Budget;
provided, however, no other individual rendering services in connection with the
Picture shall receive more favorable travel expenses than Director without
Director's approval.
14. Video/DVD/35mm Print: Provided Director executes Company's standard
use-restriction letter, then if and when commercially available, Company shall
provide Director with five (5) videocassettes and five (5) DVDs of the Picture,
and also when available one (1) 35mm print (a so-called "wetgate" print) of the
Picture, for his personal use only.
15. Guild Agreements: The DGA Minimum Basic Agreement and the Writers
Guild of America Basic Agreement shall be applicable to this engagement and
Company shall become and remain signatory to each.
16. First Opportunity Rights for Subsequent Productions: Subject to
standard terms and conditions to be negotiated in the long form agreement
pertaining to this first opportunity right, Director shall have the right of
first opportunity to direct any and all derivative projects (i.e., projects
based in whole or in part on the Picture or the screenplay therefor), including,
without limitation, any theatrical sequel, prequel or remake (either, a
"Subsequent Theatrical Production"), and any television pilot, mini-series or
movie-of-the-week (either, a "Subsequent TV Production"). Company shall
negotiate in good faith with Director for his directing services for the first
Subsequent Theatrical Production upon financial terms for his directing services
no less favorable than the financial terms hereunder for his
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directing services for the Picture, and any agreement for either the initial
Subsequent Theatrical Production or Subsequent TV Production shall contain a
provision substantially similar to this.
17. Insurance: Director shall be covered as an additional insured on
Company's errors and omissions insurance policy and under a general liability
insurance policy in connection with the Picture.
18. Premieres: Provided the Picture is completed with Director and he is
not in material breach, Director and his non-business-related companion shall be
invited to all United States celebrity premieres (if any) of the Picture and all
domestic and international film festivals in which the Picture is to be
screened. If any of said premieres are more than 50 miles from Director's then
permanent residence, then with respect to one (1) such premiere (of Company's
choice), Director shall be entitled to first-class round trip transportation for
Director and his non-business-related companion, a first class hotel room for
one night and a per diem to be negotiated in good faith (but in no event less
than any actors who attend such premiere). With respect to any said festivals
which are more than 50 miles from Director's then-permanent residence, Company
shall use its best efforts to cause the distributor of the Picture in the
territory where said festival is occurring to provide the foregoing first-class
round-trip transportation for Director and his non-business-related companion
and the same first-class hotel room and an appropriate per diem as set forth
above for the appropriate number of nights shall, at a minimum, include such
provisions in any distribution agreement covering the United States and each of
the major European territories (including a provision requiring that Director
receive no less favorable transportation, accommodation and expense provisions
than any actors who attend such festival).
19. Transfer of Picture to DVD and Video: Provided Director is available
as, when and where reasonably required, Director shall have the opportunity to
supervise (which right shall be shared with the domestic home video distributor
of the Picture) the transfer of the Picture to DVD or videocassette for no
additional compensation, pursuant to the DGA Minimum Basic Agreement, but with
Director furnished with first-class round-trip transportation, accommodations
and expenses; provided, that in the event that Director is outside the United
States at the time such services are required, the domestic home video
distributor of the Picture need not pay to transport Director back to the United
States. Company shall require in its agreement with the domestic home video
distributor of the Picture for the express benefit of Director a provision
requiring good faith efforts to schedule the transfer at a time that is
reasonably convenient for Director upon not less than three (3) months prior
advance notice as to the time and place where such transfer is intended to
occur; provided, that Company and the home video distributor of the Picture
shall use best efforts in the event of Director's unavailability to postpone the
transfer until a time when Director shall be available to exercise the foregoing
supervisory rights. In addition, and provided Director is available as, when and
where reasonably required (subject to the same provisions set forth above),
Director shall have the opportunity to supervise the creation of the television
version of the Picture intended for the United States market.
20. Non-Liability of Director/Company Indemnification of Director: As a
material condition of Director entering into this Agreement, Company hereby
acknowledges and agrees that, except as set forth in Paragraph 21 below (where
Lender is obligated to defend and indemnify Company), Company shall defend and
indemnify Director in connection with any and all claims arising from the
development, financing, production, distribution and exploitation of the
Picture. Company acknowledges that the Picture and the screenplay therefor is
based on a book not written by Director (and for whose contents and in
connection with whose acquisition of motion picture rights Director had and has
no knowledge, participation or responsibility) and agrees that Director is an
employee for hire of Company and shall have no liability or obligation with
respect to any third party claims arising in connection with the Picture.
Company shall establish a legal contingency fund of a minimum of $100,000 to
cover any legal costs and expenses in connection with third party legal claims
or otherwise, and Company will maintain E&O and General Liability.
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21. Warranty and Indemnification: Except for material taken from the book
on which the screenplay and Picture are to be based, and subject to Article 28
of the WGA Basic Agreement, any material created, composed, submitted, added or
interpolated by Director hereunder (other than at Company's express direction)
in the screenplay and/or the Picture shall be wholly original with Director and,
to the best of Director's knowledge, shall not infringe upon or violate the
copyright, literary, dramatic or photoplay rights, the right of privacy or
publicity of, nor constitute a liable or slander against, nor violate any common
law rights or any other rights of any person, firm or corporation. Lender agrees
to indemnify Company, its successors, assigns, licensees, employees and agents
and hold them harmless from and against any and all claims, liabilities, losses,
damages, costs and expenses (including reasonable outside attorneys' fees),
judgment, penalties arising out of the breach by Lender of any representation,
warranty or covenant made under this Deal Letter.
22. Formal Agreement/Governing Law: The parties contemplate that they
shall enter Into a long-form agreement (including Company's Standard Terms and
Conditions and Exhibit Defined Proceeds) (the "Long-Form Agreement") for
Director's services which shall include terms and conditions customary in the
theatrical motion picture industry, to be negotiated by the parties in good
faith consistent with Director's precedent and stature. Until the Long-Form
Agreement has been executed by the parties (at which time it shall supersede
this Deal Letter), this Deal Letter shall represent the complete understanding
of the parties and constitute the binding agreement between them to be construed
and governed in accordance with the laws of the State of California applicable
to contracts negotiated, executed and wholly to be performed therein, without
regard to principles of conflicts of laws.
Should the foregoing meet with your approval, please have Xx. Xxxxxx sign
in the space provided below.
Sincerely,
/s/ XXXXX XXXX
--------------------------------
(Xxxxx Xxxx)
XXXXX DEAD, INC.
AGREED AND ACCEPTED:
-------------------
Sidetracked Productions, Inc. (f/s/o Xxxxx Xxxxxx)
Federal Id#00-0000000
By: /s/ XXXXX XXXXXX
----------------------------------
(Xxxxx Xxxxxx)
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EXHIBIT A
Short Form Definition of Participant's Net Profits
Participant shall be entitled to 7.5% of 100% of "Producer's Net Profits," which
shall mean 50% of the amount of "Gross Receipts" (defined below) remaining, if
any, after deducting therefrom the sum of all capital raised by Xxxxx Dead, Inc.
in connection with (a) its Initial Public Offering of Class A Preferred Stock;
and (b) any additional financing, distribution, or overhead costs (overhead
costs capped at 10% of the returns) incurred by Xxxxx Dead, Inc. in connection
with The Picture. "Gross Receipts" shall mean all cash revenues actually
received in U.S. currency by Xxxxx Dead, Inc. that are directly attributable to
The Picture. Each payment hereunder shall be made within 30 days of the end of
each calendar quarter, accompanied by an accounting statement setting forth the
calculation thereof. Participant's representatives shall have the right to audit
the books and records of Xxxxx Dead, Inc. at any time as to the calculation of
Net Profits. In no event will the definition, calculation or payment of Net
Profits to Participant be less favorable than that provided to any other
participant.
N.B. that 7.5% of 100% of Producer's Net Profits is the equivalent of 3.75% of
"Adjusted Gross Receipts" as defined in the attached Deal Letter.
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