Subscription Agreement - Ckrush Entertainment Inc.
SUBSCRIPTION AGREEMENT
June 28, 2005
Ckrush Entertainment, Inc.
1414 Avenue of the Americas
Suite 406
New York, New York 10019
Ladies and Gentlemen:
1. Subscription. The undersigned (referred to herein as the
"undersigned" or the "Investor") hereby subscribes for and agrees to
purchase the units as set forth below (each, a "Unit") of revenue
participation rights (each, a "Participation Right") in connection with
the motion pictures currently entitled "Beer League" and "TV The Movie"
(each, a "Picture" and collectively the "Pictures"), on the terms and
conditions set forth in this Subscription Agreement by and between the
Ckrush Entertainment, Inc. ("Ckrush") and the Investor (the
"Agreement"). The production of each Picture shall be performed with
applicable development and production partners through separate, single
purpose business entities (the "Production Entities"). The Production
Entity for the "Beer League" project is Beer League Holdings, LLC, a
Delaware limited liability company. The Production Entity for the "TV
The Movie" project is TV The Movie Holdings, LLC, a Delaware limited
liability company. As set forth in the deal memoranda annexed hereto as
Exhibits "A", "B" and "C", and to be set forth in operative agreements
of the Production Entities, Ckrush will arrange to provide financing for
the Pictures, the Production Entities, through wholly owned production
companies, will be responsible for the production of each Picture, own
the completed Pictures and the copyrights thereto, and shall be
responsible for the commercial exploitation of the rights in and to the
Pictures in all media, throughout the world. Ckrush shall issue up to
100 units for Participation Rights in connection with the Pictures.
Each unit shall be priced at $55,000, although Ckrush reserves the right
to raise or lower the minimum investment threshold and/or divide an
investment unit to permit the sale of fractional units. The undersigned
is investing the sum of [_____________] dollars for ___ units (the
"Investment").
2. Description of Participation Right. The Investment will
entitle the undersigned to a return of the Investment, plus a twenty
percent (20%) preferred return, a pro rata share of an aggregate fifteen
(15%) percent of the Adjusted Gross Proceeds of each Picture, as that
term is defined in the Summary of Terms annexed to this Agreement as
Exhibit "A" (the "Summary of Terms") (subject to a proportionate
reduction if the full funding amount required for each Picture has not
been raised through Investors), and such other rights as more fully
described in the Summary of Terms. As more particularly described
herein, including the Exhibits annexed hereto, the Investor's return for
each Picture is dependent upon the successful completion and
commercialization of each Picture and various other factors relating to
the production, marketing and distribution of the Pictures.
3. Purchase.
(a) Simultaneously with Investor's execution of this
Agreement, the Escrow Agreement annexed as Exhibit "F" and the
Accredited Investor Questionnaire, annexed as Exhibit "G", Investor
shall provide the Investment to Ckrush by wire transfer to: Troutman
Sanders LLP IOLTA Account, Account No. 739293648, JP Morgan Chase Bank,
1211 Avenue of the Americas, New York, New York 10036, ABA# 021000021 in
the amount indicated above. Investor shall execute four (4) originally
executed copies of this Agreement, the Escrow Agreement and the
Questionnaire.
(b) The financing reflected in this Agreement and the
Summary of Terms is for a maximum of $5,500,000, of which $2,750,000 is
intended to be allocated for each Picture, inclusive of the projected
production budgets and certain fees and expenses as more particularly
described in Exhibits "A", "B" and "C" hereof. Ckrush shall have the
right to effectuate an initial closing upon the acceptance by Ckrush of
at least $2,750,000 of qualified subscriptions (the "Minimum Closing
Amount"). The Investment shall be utilized toward the funding of the
approved budget for each Picture, which shall include, inter alia,
certain development costs and production fees, for each Picture,
completion bond costs (if available), a contingency amount and as
otherwise more particularly set forth in Exhibit "A", "B" and "C"
hereof. If the entire budgeted amount for each Picture is not raised by
Investors pursuant to this financing, the Investors' aggregate 15% share
of Adjusted Gross Proceeds for each Picture will be reduced
proportionately. The Pictures are not cross-collateralized and all
revenues and expenses, and any resultant returns, will be calculated
separately.
4. Acceptance or Rejection of Subscription.
(a) The undersigned understands and agrees that Ckrush
reserves the right to reject this subscription for the Participation
Right, in whole or in part, for any reason and at any time prior to its
instruction to the escrow agent to wire the monies into a designated
production account, notwithstanding prior receipt by the undersigned of
notice of acceptance of the undersigned's subscription.
(b) In the event Ckrush shall reject this subscription, the
undersigned's subscription payment will be promptly returned to the
undersigned without premium or deduction and this Agreement shall have
no force or effect.
5. Escrow of Invested Proceeds. All net financing proceeds
(i.e., amounts raised from investors, less applicable financing fees and
legal fees and expenses) shall be maintained on Ckrush's behalf in a
non-interest bearing escrow account maintained at JP Morgan Chase Bank
pursuant to an escrow agreement in the form as set forth in Exhibit "F"
hereof. The escrow agreement shall provide, inter alia, that the
escrowed funds shall be released upon the escrow agent's receipt of a
written draw-down request from Ckrush setting forth the amount of funds
to be disbursed for a particular Picture and, such funds shall be paid
into a segregated production account for such Picture.
6. Disclosure. This offering is limited to accredited investors
as defined in Section 2(15) of the Securities Act of 1933, as amended
(the "Securities Act"), and Rule 501 promulgated thereunder, in reliance
upon the exemption contained in Sections 3(b) or 4(2) of the Securities
Act and applicable state securities laws. The Participation Right is
being sold without registration under the Securities Act. The
undersigned has received all information and materials regarding Ckrush,
the Production Entities and the Pictures that the undersigned has
requested.
The undersigned fully understands that the Production Entities
have no operating history and that the Participation Right is a
speculative investment that involves a high degree of risk of loss of
the undersigned's entire investment. The undersigned fully understands
the nature of the risks involved in purchasing the Participation Right
and the undersigned represents that the undersigned is qualified by the
undersigned's knowledge and experience to evaluate investments of this
type. The undersigned has carefully considered the potential risks
relating to Ckrush, the Production Entities and purchase of the
Participation Right. Both the undersigned and its advisors have had the
opportunity to ask questions of and receive answers from representatives
of Ckrush or persons acting on its behalf concerning Ckrush, the
Production Entities and the terms and conditions of a proposed
investment in the Participation Right. The undersigned's advisors and
the undersigned have also had the opportunity to obtain additional
information necessary to verify the accuracy of information furnished
about Ckrush, the Production Entities and the Pictures. Accordingly,
the undersigned has independently evaluated the risks of purchasing the
Participation Right. See Exhibit "D" (Description of the Motion Picture
Industry) and Exhibit "E" (Risk Factors) annexed hereto.
7. Investor Representations and Warranties. The undersigned
acknowledges, represents and warrants to, and agrees with, Ckrush as
follows:
(a) The undersigned acknowledges and is aware that there is
no assurance as to the future performance of Ckrush or the Production
Entities. The undersigned further acknowledges that neither Ckrush, the
Production Entities nor any of their related parties have made any
express or implied representation, warranty, guarantee or agreement,
written or oral, to the undersigned: (i) as to the amount of "Gross
Revenues" or the amount of "Adjusted Gross Proceeds" (as such terms are
defined herein) which will be or may be derived from or collected in
connection with the distribution and exploitation of the Pictures, (ii)
that there will be any sums payable to the undersigned under this
Agreement, or that either Picture, and any investment in the
Participation Right, is likely to be profitable, (iii) that the Pictures
will perform in any particular manner, will achieve any level of return
or amount of revenue or license fees or will be favorably received by
exhibitors or by the public, or will be distributed in any particular
manner or that any such distribution will be continuous, or (iv) that
Ckrush, the Production Entities and any of their affiliates will expend
any minimum amount or be limited in spending any amount in the
marketing, publicizing, promotion, distribution and exploitation of the
Pictures individually or collectively.
(b) The undersigned understands that the Participation
Right being acquired has not been registered under the Securities Act,
or the applicable securities laws of any states or other jurisdictions,
and the Participation Right cannot be resold or transferred unless it is
subsequently registered under the Securities Act and the applicable laws
of any states or other jurisdictions, or unless an exemption from such
registration is available. The undersigned understands that neither
Ckrush nor the Production Entities have registered and do not intend to
register as an investment company under the Investment Company Act of
1940 (the "1940 Act"), in reliance on the exclusion to the definition of
investment company provided by Section 3(c)(1) or 3(c)(7) of the 1940
Act. The undersigned acknowledges that Ckrush is relying on the
information provided by the undersigned in this Agreement and in
connection herewith in making the foregoing determinations and confirms
that all information provided herein or provided in connection herewith
is and at all times shall remain accurate in all material respects.
(c) The undersigned is purchasing the Participation Right
for its own account for investment purposes and not with a view to or
for sale in connection with the distribution of the Participation Right,
nor with any present intention of selling or otherwise disposing of all
or any part of the Participation Right. The undersigned agrees that it
must bear the entire economic risk of its investment for an indefinite
period of time because, among other reasons, the Participation Right has
not been registered, reviewed or passed upon under the Securities Act or
under the securities laws of any state or with any securities
administrator. Therefore, the Participation Right cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Securities Act and under applicable securities laws
of certain states or an exemption from such registration is available.
Furthermore, the undersigned hereby acknowledges and agrees that it will
not sell, transfer, pledge, encumber, give or otherwise dispose of,
either publicly or privately, the Participation Right. It is not
anticipated that there will be any market for the Participation Right.
(d) The undersigned is aware that its investment involves
risk and has reviewed and evaluated the Risk Factors set forth in
Exhibit "E" attached hereto and incorporated by reference into this
Agreement. The undersigned has been advised to seek independent advice
from its professional advisors relating to the suitability of an
investment in the Participation Right in view of the undersigned's
overall financial needs and with respect to the legal and tax
implications of such investment and have done so. The undersigned
believes that the investment in the Participation Right is suitable for
the undersigned based upon its investment objectives and financial
needs, and the undersigned has adequate means for providing for its
current financial needs and contingencies and has no need for liquidity
with respect to its investment in the Participation Right.
(e) The undersigned is not a member of the National
Association of Securities Dealers, Inc. ("NASD"); the undersigned is not
and has not, for a period of 12 months prior to the date of this
Agreement, been affiliated or associated with any company, firm, or
other entity which is a member of the NASD; and it does not own any
stock or other interest in any member of the NASD (other than interests
acquired in open market purchases).
(f) The undersigned has been given access to full and
complete information regarding Ckrush and the Production Entities and
has utilized such access to its satisfaction for the purpose of
obtaining information and the undersigned has either met with or been
given reasonable opportunity to meet with officers of Ckrush and the
Production Entities for the purpose of asking questions of, and
receiving answers from, such officers concerning the terms and
conditions of the offering of the Participation Right and the business
and operations of Ckrush and the Production Entities and to obtain any
additional information, to the extent reasonably available. The
undersigned represents that it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Participation Right and has obtained,
in its judgment, sufficient information from Ckrush and the Production
Entities to evaluate the merits and risks of an investment in the
Participation Right. The undersigned has not utilized any person as its
purchaser representative as defined in Regulation D promulgated by the
Securities and Exchange Commission pursuant to the Securities Act in
connection with evaluating such merits and risks. The undersigned has
relied solely upon its own investigation in making a decision to invest
in the Participation Right. The undersigned has received no
representation or warranty from Ckrush and the Production Entities or
any of its respective officers, directors, employees, managers or agents
in respect of the undersigned's investment in the Participation Right
and it has received no information (written or otherwise) from them
relating to Ckrush and the Production Entities or their businesses. The
undersigned is not participating in the offering as a result of or
subsequent to: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(g) The undersigned is an "accredited investor" as defined
in Section 2(15) of the Securities Act of 1933 and in Rule 501
promulgated thereunder. The undersigned can bear the entire economic
risk of the investment in the Participation Right for an indefinite
period of time and it is knowledgeable about and experienced in
investments in non-publicly traded companies, including early stage
companies. The undersigned is acquiring the Participation Right for its
own account for investment purposes only and not with a view to the
resale or distribution of such securities within the meaning of the
Securities Act of 1933. The undersigned is not acting as an underwriter
or a conduit for sale to the public or to others of unregistered
securities, directly or indirectly, on behalf of Ckrush, the Production
Entities or any person with respect to such securities.
(h) If the undersigned is a corporation, company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or
other tax-exempt entity, it is authorized and qualified to become an
investor in the Participation Right and the person signing this
Agreement on behalf of such entity has been duly authorized by such
entity to do so. If the investor is a corporation formed for the sole
purpose of this investment, it warrants that all interest holders
therein are "accredited members" individually or, if not, those who are
not, are listed in an attachment hereto.
(i) The information which the undersigned has furnished to
Ckrush with respect to its financial position and business experience,
is correct and complete as of the date of this Agreement and, if there
should be any material change in such information prior to the Closing,
the undersigned will furnish such revised or corrected information to
Ckrush.
(j) The undersigned hereby acknowledges and is aware that
except for any rescission rights that may be provided under applicable
laws, it is not entitled to cancel, terminate or revoke this
subscription, and all agreements made in connection herewith shall
survive its liquidation and dissolution.
8. Indemnification. The undersigned hereby agrees to indemnify
and hold harmless each of Ckrush, the Production Entities and any of
their respective officers, directors, stockholders, employees, agents,
and attorneys against any and all losses, claims, demands, liabilities,
and expenses (including reasonable legal or other expenses, including
reasonable outside attorneys' fees) incurred by each such person in
connection with defending or investigating any such claims or
liabilities, whether or not resulting in any liability to such person,
to which any such indemnified party may become subject under the
Securities Act, under any other statute, at common law or otherwise,
insofar as such losses, claims, demands, liabilities and expenses: (a)
arise out of or are based upon any untrue statement or alleged untrue
statement of a fact made by it and contained in this Agreement, or (b)
arise out of or are based upon any breach by it of any representation,
warranty, or agreement made by it contained herein.
9. Further Assurances. The Investor will execute, deliver,
acknowledge and file any and all further documents and provide any and
all further information (including, without limitation, copies of the
Investor's organizational instruments, the identities of the beneficial
owners of the Investor (if any) and current financial information with
respect to the Investor and/or any such beneficial owners) which Ckrush
may deem necessary or appropriate in connection with the transactions
contemplated by this Agreement.
10. Severability. In the event any provision of this Agreement
is found to be void, the remaining provisions of this Agreement shall
nevertheless be binding with the same effect as though the void parts
were deleted.
11. Choice of Law and Jurisdiction. This Agreement will be
deemed to have been made and delivered in the State of New York and will
be governed as to validity, interpretation, construction, effect and in
all other respects by the internal laws of the State of New York.
Ckrush and the undersigned (i) agree that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be
instituted exclusively in a state court in the County, City and State of
New York, or in the United States District Court for the Southern
District of New York, (ii) waive any objection to venue, and (iii)
irrevocably consent to the jurisdiction of a state court in the County,
City and State of New York, and the United States District Court for the
State of New York in any such suit, action or proceeding. Ckrush and
the undersigned further agree to accept and acknowledge service of any
and all process which may be served in any such suit action or
proceeding brought in a state court in the County, City and State of New
York, or in the United States District Court for the Southern District
of New York and agree that service of process upon it mailed by
certified mail to its address shall be deemed in every respect effective
service of process upon it in any suit, action or proceeding.
12. Counterparts. This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. The
execution of this Agreement may be by actual or facsimile signature.
13. Benefit. This Agreement shall be binding upon and inure to
the benefit of the parties hereto.
14. Notices and Addresses. All notices, offers, acceptance and
any other acts under this Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addresses
in person, by Federal Express or similar courier delivery, by facsimile
delivery or, if mailed, postage prepaid, by certified mail, return
receipt requested, as follows: (a) to Investor at the address designated
on the signature page of this Agreement; (b) to Ckrush at the address
set forth above; (c) in connection with either, to such other address as
any of them, by notice to the others may designate from time to time.
The transmission confirmation receipt from the sender's facsimile
machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in
person or by mailing. Copies of notice Ckrush shall be forwarded by
facsimile to Ckrush's attorneys, Troutman Sanders LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174, Facsimile No.:
212-704-6442, Attention: Michael D. Friedman, Esq.
15. Oral Evidence. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior oral and written agreements between the parties
hereto with respect to the subject matter hereof. This Agreement may not
be changed, waived, discharged, or terminated orally but, rather, only
by a statement in writing signed by the party or parties against which
enforcement or the change, waiver, discharge or termination is sought.
16. Section Headings. Section headings herein have been inserted
for reference only and shall not be deemed to limit or otherwise affect,
in any matter, or be deemed to interpret in whole or in part, any of the
terms or provisions of this Agreement.
17. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements contained herein shall
survive the delivery of, and the payment for, the Participation Right.
18. Incorporation of Certain Exhibits. Each of Exhibit A -
SUMMARY OF TERMS RE: PARTICIPATION RIGHTS, Exhibit B - DEAL MEMO RE:
BEER LEAGUE, Exhibit C - DEAL MEMORANDUM RE: TV THE MOVIE, Exhibit D -
DESCRIPTION OF MOTION PICTURE INDUSTRY, Exhibit E - RISK FACTORS,
Exhibit F - FORM OF ESCROW AGREEMENT and Exhibit G - ACCREDITED INVESTOR
QUESTIONNAIRE form an integral part of this Agreement and are
incorporated herein by reference as though fully set forth herein.
RESIDENTS OF ALL STATES: THE PARTICIPATION RIGHTS OFFERED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND SUCH LAWS, SPECIFICALLY, REGULATION D, RULE 506 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 AND THE 1996 NATIONAL SECURITIES MARKET
IMPROVEMENT ACT. THE PARTICIPATION RIGHTS ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
WOULD BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE PARTICIPATION RIGHTS HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL INVESTMENT
SUMMARY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
RESIDENTS OF NEW YORK STATE: By signing below, I understand that this
offering of securities in the Company has not been reviewed by the
Attorney General of the State of New York because of the offeror's
representations that this is intended to be a nonpublic offering
pursuant to SEC Regulation D and that if all of the conditions and
limitations of Regulation D are not complied with, the offering will be
resubmitted to the Attorney General for amended exemption. The
undersigned understands that any offering literature used in connection
with this offering has not been pre-filed with the Attorney General and
has not been reviewed by the Attorney General. This security is being
purchased for the undersigned's own account for investment, and not for
distribution or resale to others. The undersigned agrees that it will
not sell or otherwise transfer these securities unless they are
registered under the Securities Act of 1933, or unless an exemption from
such registration is available. The undersigned represents that it has
adequate means of providing form its current needs and possible personal
contingencies and that the undersigned has no need for liquidity of this
investment. It is understood that all documents, records and books
pertaining to this investment have been made available for inspection by
the undersigned's attorney and/or its accountant or its offeree
representative and itself, and that the books and records of the issuer
will be available upon reasonable notice for inspection by investors
during reasonable business hours at its principal place of business.
RESIDENTS OF THE STATE OF FLORIDA: In accordance with the Florida
Securities and Investor Protection Act, the undersigned has been put on
written notice of its right to rescind this Agreement and its investment
for a period of three (3) days from such notice. The undersigned
acknowledges that such notice is given to it as of the date hereof.
Manner in Which Title is to be Held. (check one)
___ Individual Ownership
___ Community Property
___ Joint Tenant with Right of Survivorship (both parties must sign)
___ Partnership
___ Tenants in common
___ Corporation
___ Trust
___ Other (please indicate)
Dated:
INDIVIDUAL INVESTORS ENTITY INVESTORS
----------------------- Name of entity, if any
Signature (Individual)
By:
-----------------------------
*Signature
-------------------------------- Its
Signature (if Jointly held) -----------------------------
(all record holders must sign) Title
-------------------------------- --------------------------------
Name(s) Typed or Printed Name Typed or Printed
Address to Which Correspondence Address to Which Correspondence
Should be Directed Should be Directed
-------------------------------- --------------------------------
-------------------------------- --------------------------------
City, State and Zip Code City, State and Zip Code
-------------------------------- --------------------------------
Tax Identification or Tax Identification or
Social Security Number Social Security Number
* If Participation Rights are being subscribed for by any
entity, the Certificate of Signatory on the next page must also be completed
The foregoing subscription is accepted and the Company hereby agrees to
be bound by its terms.
CKRUSH ENTERTAINMENT, INC.
Dated: By:
--------------------------- -----------------------------
CERTIFICATE OF SIGNATORY
(To be completed if Participation Rights are being subscribed for by an
entity)
I, ____________________________________, the ________________________
(name of signatory) (title)
of ______________________________ ("Entity"),
(name of entity)
a _________________________________________
(type of entity)
hereby certify that I am empowered and duly authorized by the Entity to
execute the Agreement and to purchase the Participation Right, and
certify further that the Agreement has been duly and validly executed on
behalf of the Entity and constitutes a legal and binding obligation of
the Entity.
IN WITNESS WHEREOF, I have set my hand this ___ day of May, 2005.
----------------------------------
(Signature)
EXHIBIT "A"
SUMMARY OF TERMS
CKRUSH ENTERTAINMENT, INC.
Company: Ckrush Entertainment, Inc. ("Ckrush"), a
Delaware corporation and wholly owned
subsidiary of CKP, Inc., a Delaware corporation.
Financing: Total raise of up to $5,500,000 (the "Financing"),
consisting of $2,750,000 for each Picture (as
hereinafter defined) ("Per Picture Funding Amount").
Ckrush shall issue up to 100 units (the "Units") of
revenue participation rights ("RPRs") in connection
with the Pictures (as hereinafter defined). Ckrush
shall have the right to effectuate an initial closing
upon the acceptance of at least $2,750,000 of
qualified subscriptions ("Minimum Closing Amount").
All investors ("Investors") must be qualified and
"accredited investors" as that term is defined
in Regulation D of the Securities Act of 1933,
as amended. Each unit shall be priced at $55,000,
although Ckrush reserves the right to raise or lower
the minimum investment threshold and/or divide an
investment unit to permit the sale of fractional
units. Investors shall receive the revenue
participation rights (RPR's) as more fully set
forth herein.
Project: The "Net Financing Proceeds" from the Financing are
to be used by Ckrush to finance the approved budgets
of the feature length motion pictures currently
entitled "Beer League" and "TV the Movie"
(collectively, the "Pictures"). The specific deal
terms relating to each Picture are more fully set
forth in Exhibits "A" and "B" attached hereto. As
used herein, "Net Financing Proceeds" means all
gross funds raised, less any finder's fee, commissions
or other form of sales agency or brokerage fee paid
and legal fees and expenses incurred in connection
with raising such funds.
Structure: The production of each Picture shall be
performed with applicable development and
production partners by or through separate,
single purpose, business entities and
affiliates which shall finance, own and
exploit the Pictures (the "Production
Entities"). As more particularly set forth in
Exhibits "A" and "B," Ckrush shall be the
majority owner and managing member of each of
the Production Entities, although certain
approval or consultant rights may exist in
favor of one or more production partners on
various non-financial issues relating to the
Pictures. The Investors shall be entitled to
recoup, out of first revenues actually
received by the Production Entities from the
commercial exploitation of the Pictures
("Gross Revenues"), after deduction only of
any Top Line Deductions (as defined
hereinbelow), 100% of their investment, plus a
20% preferred return (the "Preferred Return").
All such funds shall be paid to Investors on a
pro rata basis in proportion to their share of
the overall Financing for each Picture. If
the Per Picture Funding Amount for each
Picture is fully funded, Investors shall
receive an aggregate 15% interest in the
Adjusted Gross Proceeds of each Picture (as
hereinafter defined), which will be paid out
of Ckrush's aggregate share of Adjusted Gross
Proceeds for each Picture at the same time and
on the same basis of any payment of Adjusted
Gross Proceeds to Ckrush. In the event that
less than the Per Picture Funding Amount is
raised for each Picture, then aggregate share
of Adjusted Gross Proceeds to Investors shall
be reduced on a proportionate basis. As used
herein, "Top Line Deductions" shall mean (i)
guild or union liens or obligations, (ii)
unpaid direct expenses of the Picture(s),
(iii) unaffiliated third-party sales agency
fees or commissions, and (iv) any gross
royalties payable to an unaffiliated third-
party that are not subordinate to the
Financing (e.g. gross royalty to National
Lampoon (if applicable)).
Use of Proceeds: The Net Financing Proceeds will be utilized by
Ckrush to fund the approved budget of each
Picture, which approved budgets shall include,
inter alia, certain development costs,
production and producer fees and, if
applicable, financing fees, for each Picture,
completion bond costs, a contingency amount
and as otherwise more particularly set forth
in Exhibits "A" and "B" hereto. Any excess
funds after the foregoing application may be
used toward the distribution and promotion of
each Picture, for general operations of the
Production Entities, or as Ckrush may
otherwise determine to be necessary in
connection with the Pictures. Ckrush shall
have discretion as to which Picture to fund
first and, upon release from escrow, all
decisions with respect to the timing of the
application of funds toward pre-production,
production and post-production activities of
the Pictures in accordance with the operative
agreements with or relating to the Production
Entities.
Rights/Management: Ckrush and/or the Production Entities shall
own or control all rights with respect to the
Pictures, throughout the Universe, in all
media (now known or hereafter created) as more
fully set forth in Exhibits "A" and "B" (the
"Rights"), provided, however, Investors'
revenue participation rights hereunder shall
be limited to exploitation of the Pictures and
shall not include any sequel, prequel or
remake rights. Ckrush, together with its
production partners (as applicable), shall
make all decisions regarding the distribution,
licensing, promotion and exploitation of the
Rights. Investors shall have no direct role
in the management of the Production Entities
or otherwise relating to the Pictures, it
being the intention of the parties that the
Investors shall have passive economic rights
through the RPRs as set forth herein.
Adjusted Gross Proceeds: As used herein, "Adjusted Gross Proceeds"
means Gross Proceeds received by the
Production Entities and/or Ckrush (or any
affiliates thereof) from the commercial
exploitation of the Pictures, less Top-Line
Expenses, payments to any funding sources in
connection with this Financing or any overage
advances or other loans required for the
Pictures, including any applicable preferred
return, Directs Costs and Distribution
Expenses. Direct Costs means the aggregate of
all out-of-pocket costs, charges, expenses and
liabilities incurred in connection with the
acquisition, preparation, production,
completion and delivery of the Pictures,
including, without limitation, payments for
acquisition of underlying rights, pre-
production expenses, production fees and
expenses, third-party payments, deferments,
financing fees and payments to investors or
lenders, and participations, and professional
expenses directly attributable to the
Pictures. No general overhead of Ckrush shall
be included in Direct Costs. Distribution
Expenses means all paid print, advertising,
promotion and other distribution costs
relating to the Pictures, including, without
limitation, home video manufacturing and
distribution costs, as is customary for a
studio to charge in the motion picture industry.
Investment Tax Credit: To the extent permitted by law, Investors
shall obtain and/or receive the direct or
indirect benefit of a pro rata portion of any
investment tax credit to which Ckrush may be
entitled under the laws of the United States
or any other applicable jurisdiction in
connection with the Pictures and Ckrush agrees
to supply all information and to execute any
and all forms and/or documents which may be
required from time to time in order to enable
the Investors to claim and obtain any such
investment tax credit.
Escrow: All Net Financing Proceeds shall be maintained
on Ckrush's behalf in a non-interest bearing
escrow account maintained at JP Morgan Chase
Bank by Ckrush's counsel or other designee
until closing, pursuant to an escrow
agreement. The escrow agreement shall
provide, inter alia, that the escrowed funds
shall be released upon the escrow agent's
receipt of a written draw-down request from
Ckrush setting forth the amount of funds to be
disbursed for a particular Picture and shall
be paid into a segregated production account
for such Picture.
Closing Date: Provided that the Minimum Closing Amount is
received, the closings for qualified investors
will occur on such dates as determined by
Ckrush during the period April 15, 2005
through June 15, 2005 unless otherwise
extended by Ckrush, at its discretion, but in
no event later than October 15, 2005.
Bank Accounts: A segregated account shall be established for
each Picture, as well as segregated deposit
accounts for each Picture for the receipt and
administration of all Gross Proceeds (both
domestic and foreign) generated in connection
with the commercial exploitation of each Picture.
No Cross-
Collateralization: Receipts and expenses with respect to each
Picture will not be crossed. Results of each
Picture to be calculated and determined on an
independent basis. See Risk Factors.
Periodic Reporting: Ckrush shall prepare and deliver periodic
reports to Investors at a frequency of no less
than semi-annually during the first three (3)
years following the initial domestic release
of each Picture and annually thereafter,
provided, however, the first statement for
each Picture need not to be delivered until
each Picture actually generates net proceeds
in a reporting period. Investors shall have
the right to appoint a representative to
conduct an examination of the financial books
and records of the Production Entities and/or
Ckrush (once in any 12 month period) in order
to verify statements rendered. Any statements
not objected to shall be deemed conclusive
after two (2) years from the date of such statement.
Third-Party
Participants: Talent and other third-party participations in
connection with each Picture are determined at
the discretion of Ckrush and its producing
partners, but shall in no event dilute the
Investors' aggregate 15% share of Adjusted
Gross Income (or the reduced portion thereof
if the Per Picture Funding Amount for each
Picture is not raised).
Confidentiality: The Parties agree that the existence and the
contents of this Summary of Terms and the
underlying transactions are strictly
confidential and shall not be disclosed to any
individuals or organizations except to the
respective shareholders, directors, officers,
partners, members or managers of the parties
on a "need to know" basis.
Governing Law: This Summary of Terms and the transactions
contemplated hereby and other transaction
documents shall be governed by and construed
in accordance with the laws of the State of
New York (without giving effect to any choice
or conflict of laws provisions). Any disputes
must be resolved in the State or federal
courts located in the County of New York,
State of New York and all objections to such
venue or jurisdiction are waived.
Risk Factors: Any investment in the production of motion
pictures is highly speculative and involves a
high degree of risk. Prospective investors
should carefully review and consider the
information set forth under "Risk Factors," as
well as the other information contained herein.